The right to acquire a new lease is likely to be popular.

It will alleviate many of the problems which have been experienced by those flat owners who have found it difficult to sell or to mortgage as the term of the lease diminishes.Under the government's original proposals, only flat owners who are excluded from the right collectively to enfranchise would have had the right to buy a new lease.However, the scope of the right to acquire a new lease was considerably widened following amendments made during the House of Lords debates.

These amendments were reluctantly accepted by the government which fears that the extension of this right to all flat owners will now make collective enfranchisement less popular.Under the Leasehold Reform, Housing & Urban Development Act 1993 (ss.39 to 62, scheds 11 to 14), individual flat owners have the right to purchase an extension to the lease at market value, provided the flat owner has lived in the flat as his or her only, or principal home, for the past three years, or for periods totalling three years during the past ten years.

The new lease is granted in substitution for the existing lease.

(This right is commonly referred to as a 'lease extension'.)A flat owner exercising this right acquires an extension of 90 years to be added to the existing term.

For example, a flat owner with 30 years to run on the lease will acquire a new total term of 120 years in substitution for the old lease.

The terms of the new lease will essentially be the same as those in the flat owner's old lease, although a peppercorn rent will be payable during the whole term of the substituted lease.Flat owners are 'qualifying tenants' if they own a long lease at a low rent.

This is the same as the test for enfranchisement (see [1993] Gazette, 3 November, 23).

The residence condition, however, is defined differently.

To buy a new lease, flat owners must have occupied the flat as their only or principal home for the last three years (not one as for enfranchisement) before making the application, or for periods totalling three years during the last ten years (s.39(2)(b) of the 1993 Act).Provided these conditions are met, flat owners can buy a lease extension whether they decide to participate in an application collectively to enfranchise or not, and whether or not they live in a block which is excluded from collective enfranchisement.

For example, owners of flats over shops will be excluded from collective enfranchisement if the internal floor area of the whole premises occupied by the shop exceeds 10% (see s.4 (1)).Such flat owners, however, have the righ t to acquire a new lease.Whilst the 1993 Act proscribes in detail the steps and stages governing the right to buy a new lease, flat owners and their freeholder can negotiate the grant of a new lease without recourse to these statutory procedures.

In many, if not most cases, a flat owner's entitlement (or otherwise) to a new lease will be relatively easy to establish.

In these cases it will usually be sensible to negotiate the grant of a new lease, provided early agreement can be reached on valuation, payment of the freeholder's reasonable costs and related matters.The 1993 Act uses the expression 'landlord' in prescribing the procedures under which flat owners can acquire a new lease.

In many cases the 'landlord' for those purposes will be the person who owns the freehold of the block in which the flat owner lives.

In other cases, the 'landlord' may be the holder of a lease intermediate to that held by the flat owner.Under s.40 of the 1993 Act, the 'landlord' is the person who is the owner of a reversionary interest in the flat which is either a freehold interest, or a leasehold interest of sufficient length as to enable the landlord to grant a new lease.

If, for example, there are 30 years left on the existing lease, only an intermediate landlord who has a term in excess of 120 years (the existing lease, plus 90 years) can grant a new lease.

If an intermediate landlord does not have such an interest, someone other than the flat owner's immediate landlord will have to respond to the application.

This person will either be the freeholder, or the holder of a superior lease with a term sufficiently long to deal with the flat owner's application.

Such a person is known as the 'competent landlord'.It is the competent landlord who will deal with the application on behalf of itself, as well as any others who have an interest in the flat, and this includes the conduct of any court, or tribunal proceedings which may arise once a formal application for a new lease has been made.As with collective enfranchisement, a flat owner who is a qualifying tenant has the right to make preliminary enquiries (s.41).

Exercising this right does not commit the flat owner to making a formal application.By serving a preliminary notice on the immediate landlord, a flat owner can obtain the name and the address of the person who owns the freehold; the duration of any immediate landlord's leasehold interest; the name and address of every person who has a leasehold interest in the flat which is superior to the flat owner's immediate landlord's interest; and details of the duration of that interest (s.41(2)).

The recipient of the notice can also be asked to state whether another group of flat owners in the block has made an application collectively to enfranchise under s.13 and, if this is the case, the name and the address of their nominee purchaser.The recipient should provide this information within 28 days of the date on which the s.41 notice is given.The procedures in buying a new lease are as follows.-- The flat owner's initial notice.

The statutory procedures governing applications to acquire a new lease resemble those that apply to collective enfranchisement.

A formal application is commenced by the flat owner giving notice to the landlord under s.42 of the Act, as well as to any third party to the lease such as a surety, or a management company.

An s.42 notice must state the flat owner's name and address, details of the lease, particulars that support the contention that it is a lease at a low rent and details showing that the residence con dition has been fulfilled.

An s.42 notice must also propose a price payable for the new lease and other amounts that are payable if there are intermediate leases involved.It is important to note that once an s.42 notice has been given, the flat owner is liable for the freeholder's costs (and those of any intermediate leaseholders).

Hence, if a flat owner later withdraws the s.42 notice, or if the notice is deemed to have been withdrawn because of a failure to meet a procedural time-limit, the flat owner will be responsible for the freeholder's costs up to that point and will not be able to make a further application for a new lease for 12 months.Following receipt of the s.42 notice, the landlord has the right to enter the flat in order to carry out a valuation, provided the flat owner is given at least three days' prior notice (s.44).-- The landlord's response.

The landlord must respond to the s.42 notice by giving a counter-notice by the date given in the flat owner's s.42 notice.

(The landlord must be given at least two months to respond.) In this counter-notice, the landlord must state whether the flat owner's claim is admitted or denied.

If it is denied then reasons must be given (s.45(2)).If the landlord intends to oppose the application for a new lease on the redevelopment ground, this must be stated in the counter-notice.

However, the 'redevelopment ground' only applies to a lease which (a) will expire within five years, and (b) where the landlord can satisfy the court that it intends to redevelop the premises in which the flat is situated and that it needs possession in order to do so (s.47).If the landlord accepts the flat owner is entitled to a new lease, it must set out its responses to the terms proposed by the flat owner.

If, for example, the landlord does not agree with the proposed purchase price then it must say so in its counter-notice and it must propose an alternative figure.-- Applications to a court or leasehold valuation tribunal.

If the landlord denies that the flat owner is entitled to a new lease, or seeks to oppose it on the redevelopment ground, then it is for the landlord (and not the flat owner) to make an application to the county court for a declaration.

A landlord might, for example, contend that the flat owner has not fulfilled the residence condition, or that the flat owner does not hold a lease which is a lease at a low rent.

Such an application must be made to the county court no later than two months after the date on which the counter-notice was given to the flat owner (s.46(2)).

If the court makes a declaration in the landlord's favour, the flat owner's application is treated as withdrawn.

If the court finds in favour of the flat owner, the landlord must be ordered to give a further counter-notice.

In this further counter-notice, the landlord must respond to the flat owner's proposals for the terms of the new lease.If the parties are unable to agree upon the terms of the new lease, or the price payable, then application must be made to a leasehold valuation tribunal to settle such dispute.Court proceedings will also be necessary where either one of the parties fails to enter into a contract to grant a new lease; where the landlord fails to give a counter-notice (or further counter-notice); or where the landlord cannot be found.

(For example, the court may order the party in default to enter into a contract.)A group of eligible flat owners may decide collectively to enfranchise under s.13 of the Act, whilst other flat owners are only interested in acquiring a new lease.

Under s.5 4 of the Act, it is the notice under s.13 that will have priority regardless of which notice was given first.

For example, if a group of flat owners has given notice seeking collectively to enfranchise under s.13, then any notice given subsequently by an individual flat owner under s.42 will be suspended, pending the outcome of the enfranchisement application.Once the terms of the new lease have been agreed, the landlord is under an obligation to grant the lease to the flat owner at a peppercorn rent for a term that will expire 90 years after the date that the existing lease would otherwise have come to an end (s.56 (1)).

The new lease is granted in substitution for the existing lease and the flat owner must pay a premium for it assessed in accordance with the valuation principles set out in sched 13.

The flat owner must also pay other sums, such as the landlord's costs, and any outstanding rent that is owed.Except for such matters as its length and the rent, the terms of the new lease will be the same as those of the lease which it replaces.

Modifications will, however, be required, or may be appropriate, to take account of such matters as any alterations which were made to the property after the grant of the existing lease, or provisions allowing for the payment of service charges under the new lease.

If there are any changes from the terms of the existing lease, these will only take effect once the term of the existing lease expires.

If, for example, a flat owner's existing lease has 30 years to run, then any new terms will only take effect after this period has expired.

(The parties could, however, agree that any changes will have effect immediately.)The new lease must not contain a term that provides for its renewal, or which confers an option to purchase, or which allows termination of the lease before the end of its term (otherwise than in the event of a breach of the terms of the lease).

Since flat owners and successors in title have a continuing statutory right to buy a new lease, any existing rights to renew within the lease are unnecessary.The flat owner will have to pay a premium which is made up of three components: first, an amount referable to the diminution in value of the landlord's interest in the flat; secondly, the landlord's share of the 'marriage value'; and, thirdly, compensation for any losses the landlord will suffer once the new lease has been granted.As to the first factor, this calculation is based upon the difference between the landlord's interest in the flat prior to the grant of a new lease and its value once the new lease is granted.

As to marriage value, this is calculated as the difference between (a) the total value of the flat owner's existing lease; the landlord's interest in the flat prior to the grant of a new lease and the value of all intermediate leases prior to the grant of a new lease and (b) the aggregate value set out above following grant of a new lease.Turning to the second valuation factor, payments will have to be made to compensate the landlord if it will suffer any loss or damage as a result of the grant of a new lease.

Such compensation will cover (a) any diminution in value of the landlord's interest in other property and (b) any other loss or damage which results from the grant of a new lease and which relates to the landlord's ownership of an interest in any property.

These losses can include a loss of development value, which is defined as any increase in the value of the landlord's interest in the flat attributable to the prospect of works, demolition and recons truction, or other substantial works, which affect the flat and other premises.As an illustration, suppose that a flat owner has a lease with 60 years to run and is paying a ground rent of £100 per annum.

Suppose the value of the current lease is £60,000 whilst its value once a further 90 years has been granted will be £73,000.To calculate the diminution in the value of the freeholder's interest, one starts with the current value of the freeholder's interest in the flat.

This will be based upon ground rent income and the reversion after 60 years.

Assume that this value is £3000 whilst its value after the new lease has been granted will be reduced to a nominal figure of £100 reflecting the new term of 150 years and the fact that it is at a peppercorn rent.

Here the diminution in value is therefore £2900.As to marriage value, this is calculated first by adding together the value of the new leasehold and freehold interests.

Here this comes to £73,100 (that is the value of the new lease and the value of the freeholder's interest on the grant of a new lease).

From this one subtracts the current value of these interests (£60,000 + £3000) which produces a figure of £10,100.

The minimum figure payable to the freehold is 50% which means a minimum payment of £5050 in this example.This means that the flat owner will have to pay the freeholder £2900, plus £5050 which produces a total figure of £7950.

(I am grateful to Gerry Fox, managing director of Fineman Lever for his help with this illustration.)