Managing a home

Lease extension: a complete guide

8 min read

If you own a leasehold property you might want to get a lease extension, especially if you are approaching having only 80 years left on the lease. Read to discover why you’d want to extend your lease, the costs and the process.

  • Arti Dhamu, Move Specialist at My Home Move Conveyancing
    Arti Dhamu

    Move Specialist

    Published June 10th 2024

If you own a leasehold property and are wondering whether the extend your lease, are article below provides all the information you will need to know.

In this article:

It’s important to note that on 24th May 2024 a Leasehold and Freehold Reform Act received Royal Assent, meaning legislation changes to leasehold properties will soon be coming into effect. While there is no date confirmed, you should consider the upcoming changes when making any decisions regarding lease extensions. Read our article for more information on the changes and outcomes from the leasehold reform, or continue reading to find out more about lease extensions.

What is a lease?

When you buy a property, there are two types of ownership: freehold and leasehold. A freehold property is the most common with houses and means you own the property and the land it sits on. Whereas, with a leasehold, you own the property, however you lease the land it sits on, or the building it is in and pay an agreed fee to the management company or freeholder. Find out more about the difference between leaseholds and freeholds.

Why do I need to extend my lease?

When you own a leasehold property, the lease length shouldn’t be less than 80 years. This is because a lease under 80 years has a lot more problems. The number of years you can have on a lease isn’t capped, however over 100 years is deemed to be good.

If you own a leasehold and the property is approaching having only 80 years left on the lease, you should look to extend it immediately. By having a lease  with less than 80 years remaining, you may have the below issues:

  • Incur more costs – not only do you have to pay for the lease extension itself, however you also must pay what is known as a ‘marriage value’

  • which is an additional payment to the freeholder. In most cases, extending the lease length increases the value of the property and if your lease is less than 80 years when you extend it, you must pay a marriage value (50% of the additional property value) to the freeholder. So, for example, if your property is currently valued at £200,000 however is estimated to be valued at £220,000 once the lease is extended, you will have to pay 50% of £20,000 (£10,000) to your freeholder.

  • Harder to sell – the additional costs of extending a lease less than 80 years makes a property undesirable to potential buyers, or people may only be willing to buy if the price is significantly lower than the true market value, making it harder to sell.

  • You may not be able to remortgage – mortgage providers may be less willing to provide you with a mortgage, as it is a higher risk for them.

How much does it cost to extend a lease?

The cost of a lease extension, known as the premium, depends on multiple factors such as, how long there is left on the lease, the value of the property with and without the lease extension and the annual ground rent charges.

To give you an estimate of the premium to extend your lease, you can use an online lease extension calculator.

As well as the lease extension costs itself, when you extend your lease, you’ll also have additional costs to pay such as:

  • Legal fees – a solicitor or conveyancer will help you through the lease extension process

  • Survey/ valuation fees – a surveyor will complete a lease extension valuation report, to provide you with a suggested premium

  • Land registry fees – to update your property information (these might be included as part of your solicitors’ fees)

  • Stamp duty – although stamp duty applies to lease extensions, the cost for extending your lease is not likely to hit the minimum stamp duty threshold. For example, if it is the only property you own, the cost to extend the lease would need to be more than £250,000 before stamp duty would be charged. Use our stamp duty calculator to see if you could have stamp duty to pay.

  • Your freeholder’s cost – you are legally required to pay for your freeholder’s legal and valuation costs. Although when the leasehold reform comes into place, you will no longer have to pay for these.

Who can extend their lease?

Currently, you must have been the registered owner/s of your property for at least two years before you can extend your lease. If you bought the property and have since added someone to the title deeds, this also must have been updated with the land registry at least two years ago.

However, the leasehold reform that was passed in May 2024, will get rid of this rule, allowing you to extend or buy the lease at any point. The date for the reform to come into effect is still to be confirmed, however you can find out more about the leasehold reform here.

How long can you extend your lease for?

Until the leasehold reform is implemented, there are different rules for the number of years you can extend your lease for, depending on whether your property is a house or a flat. For a house, usually, you can extend your lease for 50 years and with flats you can extend your lease for 90 years through the formal lease extension process. However, under the new reform, you will be able to extend the lease on your house or flat by 990 years.

What are the steps in the lease extension process?

Instruct a solicitor

As lease extensions are a complex process it’s likely that you’ll need a solicitor or conveyancer to act on your behalf throughout and help guide you through. Due to the complexities, you’ll need a specialist conveyancer who is experienced in dealing with lease extensions. The Association of Leasehold Enfranchisement Practitioners (ALEP) can help you find a leasehold specialist you can trust, as they ensure their members consistently have a high level of service.

Many of our trusted conveyancing partners are specialists in lease extensions, find out more about our conveyancing partners and how they could help with your lease extension.

Find a valuation surveyor

Your solicitor may be able to recommend a surveyor or valuer, or they may be able to provide you a complete service with the valuation included. If not, you can again search using the Association of Leasehold Enfranchisement Practitioners (ALEP).

Unlike property valuations, lease extension valuations are usually performed remotely, however you should still try and opt for a surveyor who has experience in the local property market.

Make a formal offer

Once you have had your property valued you need to serve a ‘notice of claim’ to your freeholder. Your solicitor will do this for you. It needs to include information such as your proposed premium, how many years you wish to extend the lease for, any change requests to the ground rent and a deadline for a counteroffer.

Negotiate your offer

When your freeholder receives your notice, they will require a deposit of either 10% of the lease premium, or £250, whichever is greater. If they don’t accept your offer and counteroffer, either your solicitor or your surveyor will complete the negotiations with your freeholder, as they will best understand the evidence collected, until terms have been agreed.

If an agreement can’t be made, you’ll have to take your freeholder to a tribunal, which can be costly. However, you won’t have to pay for your freeholders’ fees on top. It can take a couple of months to get a tribunal date, and your surveyor usually makes the case on your behalf. You’ll receive a confirmation letter after the tribunal to confirm how much your premium will cost for your lease extension.

Lease extension FAQs

What is an informal lease extension?

An informal lease extension is when a deal to extend the lease terms is made privately between the owner and the freeholder, taking place with no official documents or court proceedings. With an informal lease extension, everything can be negotiated such as the length of the extension, costs to extend (the premium) and changes to ground rent. Through the informal route, you won’t have to pay for the freeholders legal and valuation fees, as nothing is legally changed.

This may all sound beneficial for owners, however you should be careful. Because it is negotiable, the freeholder could negotiate a better deal, or they could even make changes to the small print of the agreement to their advantage, such as still charging ground rent, and adding other costs, all of which could be costly or make your property harder to sell in the future.

Is it worth trying to buy the freehold instead of extending my lease?

Buying the freehold of your leasehold property is possible and is therefore something you can consider. Owning the freehold can give you more control over the managing and maintenance of the property, and you can extend your lease for free. However, there are certain criteria you need to meet. Find out more in our guide to buying the freehold of your flat or house.

Can you extend a lease for free?

Although you may be able to negotiate the premium of extending your lease, if you’re not the freeholder, there’s always likely to be a cost. Whether that’s the lease extension itself, the solicitor or valuation fees, or updating the leasehold details with the land registry.

Can I extend the lease on my shared ownership home?

If you bought your home through the shared ownership scheme and still haven’t staircased to owning 100%, you wouldn’t be able to extend your lease. If you have staircased to 100% for now you have to wait two years, from the date of your staircasing, before you can extend your lease. However, this will change under the leasehold reform.

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