Many leaseholders of flats have very little idea of what actually happens when the term of their lease expires. They may have given it little or no thought when they acquired their lease, and indeed any lender may have been quite happy with the length of the unexpired term, noting that in the current climate, nothing less than 70 years is tolerated by most lenders.

A lease is however a wasting asset and as time marches on the lease gets shorter and less valuable. It is rather like buying a new car.

What actually happens when the lease finally dwindles to zero years unexpired depends on a number of factors.

It may well be the case that legislation affords you the right to remain in occupation of your flat (or house if your property is a leasehold house) on the expiry of the term, paying either a “market rent” or a “fair rent”, the latter generally being lower than a market rent. The rent you are obliged to pay will depend on which, if any, legislation, affords you the right to remain in occupation.

The legislation surrounding such rights is complex and is not detailed here: suffice it to say that, unless your property had a high rateable value, which means researching historic rateable values (because rateable values have been abolished), or the rent payable under your lease qualifies as a “high rent”, you may not be allowed the right to remain in occupation once the lease expires, but will simply have to hand the keys back to your landlord.

If you refuse to leave in those circumstances, the landlord can instigate court proceedings to obtain possession.

In most cases however, a leaseholder will have the right to remain in occupation under an ongoing tenancy, paying either a “market rent” or a “fair rent”, and the landlord will only be entitled to seek possession on certain grounds, which include where there are arrears of rent or a breach of the repairing obligations.

Certain criteria have to be satisfied in order for you to qualify to remain in occupation, including that you are occupying the flat or house as either your only or “principal home”, or your “main residence”. There is a technical difference between these alternatives, which depends on when your lease was granted and the level of rent payable under your existing lease, but broadly they mean the same thing.

Whether or not you have the right to remain in occupation, the best way to secure the continuity of your lease is to claim an extended lease of your flat pursuant to the Leasehold Reform, Housing and Urban Development Act 1993. Subject to all qualifying criteria being satisfied, you would be entitled to a further 90 year term at zero rent on payment of a premium to the landlord. The premium is calculated in accordance with a method contained in the statute.

If you have a lease of a house, you may be entitled to claim the freehold pursuant to the Leasehold Reform Act 1967. The price payable for the freehold is calculated in accordance with the relevant basis of valuation contained in the statute.

The issues are complex and you will need specialist legal and valuation advice.

If you have any questions regarding this subject please contact Katherine Simpson or any member of the residential property team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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