What happens after the lease extension premium is agreed?

Reaching agreement on the lease extension premium is a significant milestone and triggers the final part of the process leading up to completion and registration.

This typically follows the service of a section 42 notice, receipt of the landlords counter notice and negotiations of the price to be paid to extend the lease by 90 years and reduce the ground rent to a peppercorn.

Although the valuation negotiations are behind you, there are still several important legal steps before your new lease can be completed and registered at the Land Registry.

At Peppercorn Law, we aim to keep this final stage moving as efficiently as possible while ensuring that your interests remain fully protected.

"Agreement of the premium usually means the pace quickens. The ball is back in the lawyer's court to progress things, and we aim to complete within around six weeks from that point. However, we are still heavily dependent upon the freeholder's solicitors progressing matters promptly by providing the draft deed and supplying an accurate completion statement."

Ricky Coleman, Founder, Peppercorn Law

There is a statutory deadline for completion of the lease extension

If your leasehold extension is proceeding under the statutory procedure following service of a section 42 Notice, the legislation provides a four-month period following agreement of lease terms, for the new lease to be completed. In most cases it is best to complete as soon as possible, to avoid getting too close to this costly deadline.

If completion does not take place within that period, we can advise on the options but it does involve a new process via the county court, which is best avoided.

Although four months sounds generous, delays can occur if documents are not prepared promptly, if a party falls ill or unnecessary negotiations arise over the wording of the new lease. For that reason, we usually begin preparing for completion as soon as the premium has been agreed.

What we need from the freeholders solicitors

Once the lease extension premium has been agreed, the freeholder's solicitor will usually prepare and send:

• the draft lease extension deed

• a completion statement showing the premium, landlord's recoverable costs and any apportionments.

  
  

Our role is to review the draft deed of variation, report to you on anything out of the ordinary and push back on anything we are not comfortable with you agreeing to. This is also a chance to update any out of date registered names at the Land Registry due to marriage or a deceased party.

From draft deed to completion

Once we receive the draft lease extension deed, we will:

• review the draft carefully;

• negotiate any necessary amendments;

• ensure the agreed premium has been correctly recorded;

• review the landlord's completion statement;

• agree a completion date;

• prepare an itemised completion statement so you know exactly what you are paying for

  
  

Throughout this process we keep you updated and explain anything requiring your approval.

When are completion monies due?

Clients often ask when they need to pay the lease extension premium.

To formally complete, you will need to pay:

1.      the lease premium

2.      freeholders section 60 costs (legal and valuation fees)

3.      the balance of your own costs

4.      Land Registry fees

This needs to be held by your leasehold solicitor in cleared funds at least a day ahead of completion. At Peppercorn Law we aim to give our clients at least a weeks notice as we appreciate it can take time to move funds around.

Source of funds and signing the deed

As solicitors, we are legally required to carry out anti-money laundering checks before sending completion monies.

If funds are coming from savings, investments or another property sale, we may need supporting evidence showing where the money has originated.

We will also arrange for you to sign the lease extension deed in readiness for completion. Nowadays this is often completed electronically for speed and to reduce our environmental impact.

Pre-completion searches and registration at the Land Registry

Immediately before completion we carry out the pre-completion searches, including Land Registry priority searches where appropriate along with checking the status of the freehold company at Companies House. This work goes on in the background without troubling our clients but we will flag anything that needs to be raised.

On the completion date we:

• transfer the lease extension premium and costs to the landlords solicitor;

• complete the new lease by dating it;

• diarise to register the new lease once received from the freeholders solicitor;

• confirm with you and provide an electronic copy of the dated document.

Once registration has been completed, your title will show the extended lease term and we provide you with a copy of the updated leasehold title, which can be provided to a purchaser or estate agent as evidence of the new longer lease.

What if the landlords costs are too high?

Under the statutory lease extension procedure, landlords are entitled to recover their reasonable legal and valuation costs under the relevant legislation and this is triggered by receiving a s.42 notice..

However, those costs must be reasonable. There is no set figure however, and the location of the property and the complexity of the transaction will usually dictate the level of costs.

If the landlord's costs appear excessive, they can often be challenged. We have successfully reduced substantial claims, including one where the landlord sought more than £10,000 in costs. We will advise you if we feel that a costs challenge in the First-tier Tribunal is worthwhile but rest assured we will not hold back if we feel the landlords solicitor is taking liberties with costs.

Read our guide: how we successfully challenged a landlord's costs of over £10,000 in a lease extension

If your freeholder is a council or local authority, you may also find our guide helpful:

Typical costs of a local authority freeholder in a lease extension

Ready to progress your lease extension?

If you're ready to proceed, our fixed-fee lease extension service can guide you from the Section 42 Notice through to Land Registry registration.

If you're still researching your options, visit our complete guide to lease extensions for practical advice on every stage of the process.