How To Extend a Lease

Specialist Leasehold Extension Solicitors

Buying a leasehold property means you are investing in the right to live in the property for a set time period – rather than in the property itself forever. As your lease gets shorter, leasehold property starts to steadily lose value. And that’s why, at one stage or another, you’re going to need to extend your lease.

Got a question about extending your lease? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE no strings attached initial phone advice

When you should consider extending your lease

Once the unexpired part of your leasehold dips below 85 years, you should really think about extending your lease. In particular the price of the leasehold extension is likely to increase significantly once you have less than 80 years left to run. If the unexpired part of your lease therefore is nearing just 80 years and you are interested in extending your lease, our advice is to act swiftly and contact us straight away.

If the remaining lease term is shorter than that, extending a lease is something that you should deal with sooner rather than later.  The reason for this is that once a lease drops below 70 years owners can experience difficulty in selling their flat as the shorter lease term can have the effect of making flats un-mortgageable and increasingly hard to sell.

Mortgage lenders have brought in more and more strict requirements about the minimum length of a lease that they will consider lending on – and many refuse to lend even if as many as 70 years remain on the lease.

How To Extend a Lease. Specialist leasehold extension solicitors

Once a lease has dropped just one single day below 80 years, the premium payable to the freeholder rises sharply, because your freeholder is then entitled to charge an additional premium – called the marriage value. The overall premium continues to rise dramatically as your lease gets shorter.

So by acting now in extending your lease, you are likely to save yourself a significant amount of your hard earned cash in the long run.

How easy to is it to extend a lease?

You have 2 options – the formal or statutory route and the informal or voluntary route.

The formal route involves your legal right to add another 90 years on onto the end of your existing lease, ground rent set at a peppercorn i.e. in nil rent in future.

The formal route is relatively straightforward provided you have a specialist solicitor with plenty of lease extension experience who understands the process – but very few do. But if you try to do it yourself, or use a solicitor who really has now understanding of how lease extension works, you may find it really difficult – and potentially much more expensive.

The informal route is purely a voluntary deal between you and your freeholder. So you have no legal right and the freeholder can set the terms, change the deal or pull out at any stage. As a result it’s a much riskier process and most people stick with the formal or statutory route to ensure they retain control of the lease extension themselves.

Who is eligible for an extended lease?

To be eligible to extend your lease:

  • You must have owned your flat for at least 2 years – even if you have not lived there throughout the period.
  • You must be a residential tenant.
  • The original term of the lease must be at least 21 years.

Formal lease extensions – What do I get?

If you choose to go ahead in extending the lease on your flat, and you use the formal statutory route, you have a legal right to:

  • Increase the term of your lease by 90 years on top of your unexpired term.
  • Avoid paying any ground rent for the remaining term of the lease (although you will still have to pay any service charge)

How To Extend Your Lease – first steps

  1. If you are eligible for an extended lease, the first thing you need to do is contact a specialist solicitor to deal with all the legal documentation in extending your lease.

  2. You will normally then need to appoint someone to value the premium you need to pay your freeholder – normally carried out by a chartered surveyor. Again it’s important to appoint someone who specialises in extending leases. Our team regularly work alongside experienced specialist surveyors up and down the country and can help you choose the right valuer.
  3. Your solicitor will then serve an Initial Notice on your landlord offering a price to extend your lease.
    This S42 notice sets the whole process into motion and from that point on, the leaseholder seeking leasehold extension will be responsible for the freeholders professional fees. Before serving the notice, your solicitor will need to gather certain information relating to the landlord and documents from the Land Registry that relate to the freehold of the property.

  4. Your landlord then has a minimum of two months to respond in a document called a “counter notice”. This can do one of three things: admit your right to extend the lease, refuse with reasons, or refuse on grounds that the property is due to be redeveloped. Generally speaking, the first option is by far the most common outcome. The landlord must typically respond within 28 days.

  5. Commonly, however, at this stage negotiations take place between your solicitor, surveyor and your landlord in an attempt to agree a price acceptable to everyone. However the law around extending leasehold property is complex, and there are a number of strict time limits – so it’s important that your solicitor fully understands this specialist area of law.

Solicitors who work on property and conveyancing only very rarely deal with lease extension work and many will have never handled this sort of work before. You don’t want to rely on that sort of solicitor to work on your lease extension.

Our specialist five strong lease team does nothing but lease extension and enfranchisement work and know the process and the law back to front.

How much does it cost to extend my lease?

A tenant will normally need to pay the following costs when extending a lease:

  • Your own legal costs and disbursements;
  • Your surveyor’s costs in preparing a for a leasehold valuation report;
  • Your freeholder’s reasonable legal and valuation costs incurred in extending your lease (although if you feel that these are unreasonable then you are able to challenge these in the First Tier Property Tribunal – previously known as the Leasehold Valuation Tribunal );
  •  The premium payable to the freeholder for the lease extension.  This is calculated using the following formula:
    1. The drop in value of the freeholder’s interest.  This is the value of the freeholder’s present interest compared with the value of his interest once you have extended your lease; and
    2. The landlord’s share of the marriage value.  This is the increase in the value of your flat once the lease extension has been completed (on average, a flat with a longer lease will be worth more than a comparable flat with a short lease). This ‘profit’ element is only achievable because the freeholder has agreed to grant a lease extension and therefore the freeholder is entitled to 50% of this profit.
    3. Any other compensation due to the landlord.

If some of the other tenants in your block are considering extending their own leases, it’s well worth trying to work together as this can help to keep your costs down – in particular you are likely to create an opportunity for substantially reducing the cost of a formal valuation.

You may also want to consider grouping together and buying the freehold (a process known as freehold or collective enfranchisement), if there are a sufficient number of you that are willing to join in.
Click here to read more about the differences between extending your lease and buying your freeehold

Leasehold extension – is a formal valuation essential?

No it isn’t, but a leaseholder is always well advised to a get a proper valuation from a specialist surveyor when looking to extend any lease.

Why? A proper valuation by a specialist will give you a base price to work upon when in negotiations. Without one you may be heading to the negotiating process with an unrealistic price in mind, which could lead to your application being declared invalid or refused – or in you agreeing a vast inflated price with your freeholder.
Click here to read more about your lease extension valuation

What should be included in a leaseholder’s notice?

A section 42 notice to start the lease extension process need to contain the following:

  • Full name of the leaseholder.
  • Address of the property in question.
  • Details of the lease, including start date and general terms
  • The premium proposed for the lease extension, along with other payable amounts that are connected to the lease.
  • The terms proposed by the leaseholder and any agreements they wish to be either amended or remove.
  • Full name and address of the freeholder’s representative (if they have one).
  • A deadline for the freeholder to issue a response by, whether that be counter-offer, acceptance or refusal. By regulation this date must be two months or more from the one in which the leaseholder originally served notice to extend.

How long doesl it take to extend my lease?

If the freeholder quickly agrees a price for extending your leasehold, the whole process can be completed in as little as two or three months.

However extending your lease will commonly take longer – in particular most landlords spend time trying to negotiate the price up.

In the worst case scenario, if you cannot agree a price with the freeholder, you may need to apply to the First Tier Property Tribunal to set a price for an extended lease which can extend the whole process to a year or more – fortunately this is unusual.

I can’t locate my freeholder. Is it still possible for me to extend the lease on my flat?

Yes, you can.  Any leaseholder who wants a lease extension but can’t actually find their freeholder can apply to the County Court for what is known as a Vesting Order. It’s normal, however, for solicitors to deal with these kind of applications, because they are complex.
And although most solicitors rarely deal with missing freeholders, our team do on a regular basis – and have plenty of experience in applying for Vesting Orders against absent freeholders.

However, if the County Court is to issue a Vesting Order they must be satisfied that you have made a reasonable to attempt to service to notice the freeholder of your own accord. the kind of evidence you will need to supply include the following:

  • but you have served a notice of extension to the freeholder’s current or last known address, or served the same notice in a local paper or gazette.
  • that you have sent a request to the courts to dispense with the serving of a notice.
  • you search the land registry to confirm that the freeholder hasn’t moved or changed address.
  • You have tried to visit the freeholder’s address
  • you have obtained witness statements that confirm that there is no known forwarding address for him or her.

It’s quite common for our team to use an experienced enquiry agent to carry out these kind of enquiries in order to satisfy the  Court you have done enough to justify a Vesting Order be granted.

If the Court is satisfied with your evidence, they will grant the Vesting Order and at that stage will transfer your case to the First-Tier Property Tribunal. The Tribunal’s job is to consider the right level of premium you will need to pay to extend the lease on your flat.

The advantage here for the leaseholder is that unlike normal lease extension negotiations, there is no surveyor on behalf the freeholder to provide evidence that a higher premium should be paid. So although there are additional legal costs, there is a significant advantage with absent freeholders in that not only is the premium you need to pay likely to be lower, but in addition you will not have to pay your freeholder’s legal and valuation costs.

The final stage involves your solicitor preparing the lease attention documentation and registering it with the Land Registry and you paying the premium into the County Court. Your cash stays there until the freeholder eventually appears. There is nothing they can do to overturn the order – they are simply entitled to receive the premium that you have paid to the Court.

When it comes to probate, do the personal representatives need to have owned the property for two years or more before they can apply to extend a lease?

If the qualifying leaseholder passes away before making an application for lease extension, representatives of the deceased may exercise the right to extension for a period of up to two years – provided that the deceased owner had owned  the property for 2 years prior to death .

Thinking of a sale or re-mortgage?

As the process of lease extension can take months, if you are thinking of selling or re-mortgaging your flat it is well worth starting the lease extension procedure early .

Want to extend your lease – contact our specialists today

The laws and regulations concerning extending leases are complex and it is important to get expert legal advice. Wherever you live – our specialist solicitors can help. Contact us now

  • call us free on FREEPHONE 0800 1404544 or
  • email us using the contact form below

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