In England and Wales many people own a leasehold interest in their property. This means that they, as a ‘lessee’, have an interest in the property for a certain and limited ‘term’.
Upon expiration of this term, what happens?
The simple answer is that a lessee has the right to security of tenure, meaning they have the right to stay in the property. However, they must meet certain criteria to exercise this right, as set out in Schedule 10 of the Local Government and Housing Act 1989.
There are two requirements for a lessee to be eligible for security of tenure:
- The lessee must be in occupation of the property as his or her only or principle home at the end of the lease
- There must be a long residential tenancy at a low rent
To qualify as a ‘long residential tenancy’ the lease must originally have been granted for a term of more than 21 years.
To qualify as ‘low rent’ the following must apply to the lease: there was no ground rent; or ground rent was less than two thirds of the rateable value of the property on 31st March 1990 (for leases starting before 1 April 1990); or ground rent was no more than £1,000 a year in Greater London or £250 per year elsewhere (for leases starting on or after 1 April 1990).
Provided the above criteria are met, the tenant is not required to leave the property once the term expires. The lessee or landlord must take specific steps for the tenancy to come to an end, otherwise it will continue on the same terms as previously.
The tenant can choose to end the tenancy by serving the landlord with one month’s notice. At this point, the tenant would lose security of tenure (and any right to acquire the freehold or an extended lease) and must leave the property on the date specified.
There are two options for a landlord to end the tenancy: (1) offer an assured periodic tenancy with a monthly rent; (2) seek possession of the property. For each the landlord must serve notice in a prescribed form and comply with certain conditions as detailed in the legislation.
If the landlord seeks possession, they can only do so by proving certain grounds (such as non payment of rent) and by order of the court.
Importantly, the expiration of a long residential lease does not extinguish the right to acquire the freehold or the right to extend the lease. However there are strict time limits to take action if the landlord has already served notice for an assured periodic tenancy or possession.
It is worth noting that certain properties are excluded from this right altogether, such as high value properties and those owned by the Crown or a local housing authority.