Grant of the new lease is the lease extension granted to the lessee that will either take immediate effect or start on a future date. Lease agreements are highly complex and long-term, therefore, both parties should understand their obligations before agreeing to the terms of the lease.
Granting a new lease requires the landlord and existing tenant to consider rent, repair, insurance, assignment of lease, and other material terms. The landlord grants possession of land to the existing tenant for a definite period in exchange for rent and property maintenance charges.
The new lease agreement clearly outlines the material terms agreed by both parties, ground rent, services charge, and the rights and obligations of both landlord and the leaseholder.
If the tenant qualifies for a grant of a new lease or lease extension, the landlord will send a draft lease to the leasehold for approval. If the tenant has any concerns, they can negotiate amendments or propose alternate terms.
The tenant does not have entitlement or the right to acquire a new lease if they do not meet the eligibility requirements. Only qualifying tenants will be granted a new lease, including
- The leaseholder using the leased property for a minimum of two years
- They are granted a long-term lease for over 21 years
Calculating the Premium
When requesting a lease extension, the qualifying tenant will propose a premium payable in their notice in relation to the grant of the new lease. To that end, consult an experienced valuer to understand how much premium is payable for the lease extension.
It is likely that the landlord will deny the tenant's request if an inaccurate premium is proposed. Consider the diminution in value of the freeholder's interest, the share of marriage value, and compensation for any loss that may arise from lease extension.
Grant of New Lease
If the tenant meets the qualifying criteria and has the right to acquire the new lease, the landlord is bound to grant a new lease to the existing tenant upon payment of the premium. The new lease is usually for a term of over 90 years.
In regard to terms, the new lease contract will have similar terms as the existing lease. However, some modifications can be made as prescribed by the law or for transparency.
Lease Extension Costs
To clarify, the premium is not the only cost associated with the grant of a new lease. Irrespective of the fact that the tenant gets a lease extension or not, both parties have to bear the legal costs of hiring a solicitor or conveyancer.
In addition, they will also be liable for paying expenses related to serving the notice, valuation, and other investigations. Often, extending the lease becomes more legally complex than expected, therefore, it is hard to calculate the exact cost of a lease extension.
To summarise, the qualifying tenant can start the process of acquiring a new lease by completing and serving a notice to the landlord. Take independent legal advice to streamline the process and avoid any legal complications.