Get more information on how to extend the lease on your property, including why you may want to do it and the process.
The problem with having a leasehold property is that it's a diminishing asset, because the longer you own it, the shorter the lease becomes, which has a negative effect on the value of the property.
However, you do have the right to extend your lease under the Leasehold Reform Housing and Urban Development Act(1993).†
If you own a flat it's possible to extend the lease by 90 years and if you own a leasehold house, it'll be by 50 years.
A property with a short lease can drastically affect the value of your abode and the lower the lease continues to drop, the bigger hit you'll see in the property price when you come to sell.
Once it drops beneath 80 years, it can significantly reduce the value.
This is because it becomes far more expensive and difficult to lengthen the lease after it drops below this mark, making it a lot less appealing to potential buyers.
The reason for this is once it goes below this point you'll be required to pay 50% of the flat's 'marriage value' to extend the lease.
The marriage value is basically the extra property value you'd gain by extending the lease or collectively buying the freehold with the other tenants that share your lease (known as collective enfranchisement).
This could represent a substantial amount, so it's wise to consider lease extension before you get near the 80-year threshold.
You must meet certain requirements before you're able to extend a lease, including owning the property for at least two years.
Bear in mind that could become a problem if you want to buy a flat with between 80 and 82 years remaining on the lease - consider asking the previous owner to begin the lease extension process as a condition of the sale.
Also the property can't be used for commercial or business purposes and the landlord can't be a charitable housing trust either.
There are few different elements which will help determine how much it will cost to extend the lease on your property.
This includes the length of the remaining lease, the value of your property and any ground rent that you currently pay. If you've made any improvements to the property while you've owned it, this will also be reflected in the cost of extending the lease.
The closer the lease gets to 80 years, the more expensive it is to extend.
As well as this, you also need to take into account the legal fees involved and the cost of the property valuation - a surveyor will need to come your property and value the lease extension. Updates to the Land Registry will also need to be paid for.†
You'll probably need to instruct a solicitor to draw up contracts and complete the leasehold extension transaction.
It's a good idea to shop around and get more than one quote for the legal work before choosing your solicitor.
You may be able to negotiate the terms of the lease informally with your landlord. This could not only help save time, but also money
If the lease extension costs £125,000 or more, be aware that you'll have to pay stamp duty as well.
It isn't necessary to have a valuation but it can really help to prevent you from overpaying for your lease extension.
The Lease Advice Service calculator† is a good place to start to get an idea of the costs involved.
The person who comes out to value the lease extension can advise you on how much to offer in the notice to the freeholder.
They won't be able to provide you with an exact figure for the premium you'll need to pay as it's not an exact science, but they'll be able to give you the best and worst figure you could expect though.
This will be based on information including local experience and potential areas of claim or counter-claim.
For leases of less than 60 years, extensions can be extremely pricey and the Lease Advisory Service calculator won't be able to give you a value for leases with less than 50 years remaining.
Make sure you take legal and valuation advice if you're in this situation.
Note that as well as the lease premium, you'll be required to pay any legal fees that the freeholder incurs as a result of the lease extension and your own legal fees too of course.
To begin the process of lease extension, you need to serve notice on your landlord. You'll be required to have certain information in the leaseholder's notice.
In the notice, you'll need to outline the premium you intend to pay for the lease extension and any changes you propose for the lease agreement.
Your leaseholder's notice will detail when the landlord must present their counter-notice by.
This will show whether they accept the terms set out by the leaseholder's notice or if they won't permit it, they must give appropriate reasons.
It's highly unlikely, but if there's less than five years left on the lease and the landlord can prove that they're going to demolish and redevelop the building, they can present this to a court.
Instead of following the statutory path of extending the lease, you may be able to negotiate the terms informally with your landlord. This could not only help save time, but also money.
However, you'll still need to engage a solicitor to draw up the contracts and you may want to take legal and valuation advice as well.
Although there is a legal process set-out for lease extension, sometimes things aren't straightforward.
If you and the freeholder aren't able to come to an agreement on the price for extending the lease, the case can then be referred to the first-tier tribunal. Be aware that this is not likely to be quick and will add time to proceedings.
You can apply for a lease extension to the county court, which is called a vesting order.
They have the power to grant the lease extension if they believe that you're eligible to have it.
The premium for this will be determined by the first-tier tribunal.
If the landlord is bankrupt or in receivership, it's possible to serve the notice to either the trustee in bankruptcy or the receiver. They essentially are the landlord in these situations.
It may be worth thinking about buying the freehold instead of extending the lease, which means that you'll own both the property and the land it occupies outright.
On a leasehold house you'll buy the freehold on your own, but for flats there may be the option of collective enfranchisement, where you agree to buy a share of the freehold with some or all of the other leaseholders.
You'll need more than half of the other leaseholders in the building to agree to buy the freehold before you can proceed.
It can be possible to remortgage with extra borrowing to pay for a lease extension, but be aware that this will mean an increase in your mortgage repayments.
If you aren't able to make your mortgage repayments, your property may be repossessed, so this option needs to be considered carefully.
You'll also need to know where the funds for the legal fees are going to come from before embarking on the quest to extend your lease.