How to extend a leasehold

How can I extend my lease?

If you’re looking to extend the lease on your property, there are two different ways to approach it.

Formal route – Also known as the statutory route, this is where the leaseholder serves a statutory notice to the freeholder informing them that they wish to extend the lease by 90 years and no longer pay ground rent. There’ll be negotiations between the two parties on the cost and a decision will be agreed together.

Informal route – The leaseholder negotiates with the freeholder without serving a statutory notice. The lease can be extended up to 999 years, but the freeholder can charge what they want, and ground rent could even be increased over the term of the lease.

Although the statutory route can take longer it’s the safest option, as there’s no guarantee that you’ll receive your lease extension, even after paying, if you go the informal route. It may also cost more than it needs to and often freeholders will only extend the lease by a short amount, which means you’ll end up paying for another extension in the future.

For security and peace of mind, it’s always wise to formalise your lease extension through a solicitor with expertise in this area.

Remember that if the lease on your property is short (80 years or below), it’s your legal right to extend it.

Process for lease extension

If you want to extend your lease via the statutory route, here’s what you need to do:

• Check whether you’re eligible to extend the lease on your property. You’ll need to have owned the leasehold for the property for at least two years
• Inform the freeholder that you intend to apply for a lease extension via the statutory route
• Appoint a solicitor for your case. Make sure they specialise in lease extensions and are part of the Association of Lease Extension Practitioners (ALEP)
• Get a full valuation for your leasehold property. You may be recommended a valuation surveyor through your solicitor, or you can find your own via ALEP. The valuer will let you know how much you can expect to pay for a lease extension and provide you with evidence to support this, which will be used to negotiate with the freeholder
• Serve your tenant’s notice to the freeholder (also known as a section 42 notice). This will be done by your solicitor and will contain your opening offer detailing how much you wish to pay to extend the leasehold, based on the valuation
• Pay the deposit to the freeholder. This will be 10% of your lease extension valuation offer or £250, depending on which is higher
• Freeholder will accept or decline your opening offer. If they decline, they may come back with a counteroffer. If it isn’t right for you, your valuer can negotiate with the freeholder until a decision is reached

If negotiations reach a stalemate, it’s possible to apply to a First-tier Tribunal to reach an agreement, but this will be costly for both you and the freeholder.

Why would you extend your lease?

Any lease below 80 years is known as a short lease and can make it more difficult to sell or even remortgage your property. It can even affect the value of your home.

If your lease is nearing 90 years, it’s important to get the ball rolling on extending your lease, as the closer it gets to the 80-year mark, the more expensive it will be to extend.

How much does it cost to extend a lease?

This will depend on a lot of different factors, including how long you have left on your lease, the value of your property and the ground rent.

You’ll also need to think about valuation and solicitor’s fees for both you and the freeholder.

Yes, you’re required to pay ‘reasonable’ legal and valuation fees for the freeholder too. All this means that extending a lease is a long and costly process, but necessary to protect the value of your property.

Who's allowed to extend a lease?

You’re able to extend the lease on your property if you’ve owned it for longer than two years and it has a long lease.

A long lease doesn’t mean how long it has left now, but when it was originally granted. This must be over 21 years.

What is a section 42 notice?

A section 42 notice or tenant’s notice is what triggers the start of legal proceedings for extending the lease. From the date it has been served to the freeholder, you’re liable for paying their legal fees (up to a reasonable amount).

It also sets the valuation date, so if any factors after you’ve served the tenant’s notice affect the cost of extending the lease (the value of the property, for example), they won’t be taken into account.

It’s important to make sure that the tenant’s notice is correct and completely accurate to avoid it being rejected. Correcting mistakes once it has been served will cost you and delay your lease extension application.

The tenant’s notice will contain information on you and your property. It will also contain details on the lease and the extension proposals, as well as the deadline for the freeholder’s counteroffer.

Can a freeholder refuse to extend a lease?

If you’re legally eligible, your freeholder can’t refuse.

So, if you have owned the property for over two years and it has a long lease, you’re able to extend your lease.

What shall I do if I have an absent landlord?

If you can’t find the freeholder, it’s possible to find their details via the property’s title summary at the Land Registry. You’ll need to pay a fee to access this.

If you can’t get their details from the Land Registry, your solicitor may be able to apply to the county court for a vesting order to extend the lease. You’ll then be required to get the price fixed at a First-tier Tribunal.