Lease Extensions

If you are a leasehold flat, did you realise there is legislation which gives you the right to increase the value of your property? The value of your flat is likely to be significantly increased by a properly negotiated lease extension. However, any leasehold extension involves a complex area of law and it’s critical to have solicitors who really understand what they’re doing.

Increasing the value of your flat

As the length of your lease decreases, it inevitably becomes worth less. If you have a very long lease (such as one over 100 years) then your flat is going to be worth more – possibly even as much as a flat which comes with joint ownership of the freehold of the block.

In a nutshell, the shorter your lease, the less you are likely to get for your flat when you try to sell it. It definitely pays to extend your lease by a further 90 years if you have the option.

Increased security

You don’t have to do to extend your lease. You can simply do nothing and let your lease expire. However, if this happens then your flat will revert back to the freehold, meaning that you have nothing to sell and no lease to extend in the future. A lease extension means that you will not be faced with losing your asset once the lease expires.

Easier to sell

Another great reason for lease extensions is that it is generally harder for leaseholders to sell properties that have shorter leases – simply because prospective buyers tend to be more drawn to properties with long leases.

When you come to sell your flat, you may find that you need to extend your lease if your buyer is to get a mortgage. The reason for this is that the length of unexpired lease is becoming a sensitive issue with mortgage lenders, with many insisting on longer minimum terms than they did a few years ago. The very fact of your need to sell with an extended lease, gives a significant negotiating advantage to your freeholder – who is likely to require an increased price if you want to extend your lease quickly rather than risk the inevitable delay of a formal lease extension application and risk even further delay involved in a trip to the Leasehold Valuation Tribunal. The process of lease extension can be started by the seller of the flat prior to putting the flat on the market.

Easier to mortgage

It is getting increasingly difficult to get a mortgage on a flat with a short lease. Many UK lenders are increasingly tightening the criteria for lending on leasehold property. In fact, many mortgage lenders won’t approve mortgages on flats with less than 70 years left to run on the lease. In contrast, just a few years ago, the minimum term remaining on the lease required to qualify for a mortgage was nearer 55 years. This dramatic shift in lending criteria has simply left many flats unmortgageable – and with the current economic climate, and the reluctance of many banks to lend, this is likely to get worse, not better.

The result, extending your lease in advance is very important when it comes to getting a mortgage or selling your flat.

No ground rent is payable

As part of the statutory process of lease extension, your ground rent will be reduced to what is referred to as a peppercorn rent i.e. In effect you will know longer need to pay any ground rent.

Now is a great time to extend your lease

While extending your lease always makes good commercial sense, now is a particularly good time to go for your lease extension.

Why? Given the current and on-going economic climate, the UK housing market remains relatively depressed. That’s great if you want to extend your lease – as the price payable to your landlord to extend your lease is directly related to the market value of your flat. So if the value of your flat has dipped, your lease extension will cost you less.

The first thing you should do is hire specialist lease extension solicitors with the application for you. You may instruct your solicitor to approach your freeholder informally to attempt to agree a private lease extension, but be aware of the risks of doing so.

2. You will then need to instruct a surveyor who specialises in lease extension. Their job will be to value your proposed lease extension so you can try to agree a price with your landlord

3. Next your solicitor will work with you to collect all the necessary information such as the valuation report, a copy of your lease, the identity and contact details of the relevant landlord along with proof of your eligibility for a lease extension.

There are only three basic criteria that you need to meet

• Residential lease – your lease must be a residential lease i.e. commercial leases are not eligible for a lease extension

• Originally granted at least 21 years – your original lease needs to have been granted for at least 21 years. It is highly likely that this will be the case, but it is definitely worth checking to make sure how long your original lease was before you begin proceedings to extend it

• 2 years ownership – in order to qualify to extend your lease, you need to have owned the lease for a period of at least two years. However, you do not need to have lived there for all that time , or indeed at all – you simply need to have been the owner for at least two years. So if, you are a buy to let landlord, and have owned and rented out your flat for two years – you are still likely to be eligible for leasehold extensions

4. In the absence of an informal lease extension, the next step is serving a formal notice on your landlord (or the freeholder, if they are not the same person) – to inform them that you intend exercising your lease extension rights. If you are unable to agree on a price for your lease extension with your landlord, then you will need to apply to a leasehold valuation tribunal to determine the price that you will pay

5. After you have served that formal Notice on your landlord forming them of your intention to extend your lease, your landlord then has 21 days to respond to you and request any further information. They can also range for their own valuation on your property as long as they give you three days’ notice before doing so. Furthermore, your landlord is required to serve a Counter-Notice on you by the date specified in your original Notice (your solicitor will be able to advise you on this) to either accept or reject your application to extend your lease

6. If you and your landlord are unable to agree on a price or on another aspect of the leasehold extension you will enter into a statutory negotiation period. This will last for at least two months, after which you can apply to a leasehold valuation tribunal to settle any outstanding issues between you and the freeholder. You must make this application within six months of receiving the Counter Notice.

Lease Extension – the marriage value

One of the most important time considerations when considering an exercise of your lease extension rights is if your lease is little more than 80 years left to run. The reason this is so important is that the price you have to pay your landlord to extend your lease significantly increases as soon as the remaining term of your lease dips below eighty years. Once you have less than 80 years left to run on your lease, your landlord can charge an additional premium for your lease extension – this is known as the “marriage value”. This is the increase in value of the flat after the lease extension has been completed. This ‘profit’ element is only achievable because the freeholder has agreed to grant the lease extension and so the freeholder is entitled to 50% of the profit.


Before you decide to extend your lease, you should be aware of the various costs you will incur when you apply for a lease extension Although the price of every lease extension varies according to the remaining term of the lease and the nature of your leasehold property, these costs include:

• the costs of your own lease extension solicitors

• your landlord’s reasonable legal and valuation costs – as the party who instigated the lease extension process, you will also have to pay your landlord’s reasonable legal costs (and the cost of the landlord’s own lease extension valuation) as part of the agreement. However these costs have to be reasonable –your landlord can’t just charge whatever he or she wants, and if you can’t agree a figure with your landlord, you have the option of challenging those costs at a Leasehold Valuation Tribunal

• the costs of the lease extension valuation report. Some leaseholders think that they can choose to do without a valuation, however, we strongly advise that you need to get a valuation of your property carried out by a qualified surveyor to determine the right price to extend your lease.

• the ‘premium’ payable to your freehold for the lease extension. This is made up of the aggregate of:

The diminution in value of the freeholder’s interest. This is the value of the landlord’s present interest compared with the value of his interest once you extend the lease.

• the ‘premium’ payable to your freehold for the lease extension. This is made up of the aggregate of:

1. The diminution in value of the freeholder’s interest. This is the value of the landlord’s present interest compared with the value of his interest once you extend the lease.

2. The Marriage value. and

3. Any other compensation due to the landlord.

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