Lease Extension FAQs

Attwells Solicitors are committed to providing jargon-free law; therefore, we have produced this useful lease extension frequently asked guide. For more information regarding lease extensions please call Ahmed on 0207 722 9909 or email ahmed.anwar@attwells.com.

Q. Can I get a lease extension?

A. Yes, subject to various requirements and provided that you have owned the property for at least two continuous years. 

  • The original lease must have been a long lease i.e. granted for a term of 21 years or more.  If you are eligible, then you should be able to obtain a lease extension with a term of an additional 90 years (to be added to the current lease length); 
  • The ground rent will be extinguished to nil (also known as a peppercorn).  

Q.  What are the advantages of a lease extension?

  • The shorter the lease length the more it will cost to extend;
  • a shorter lease knocks market value off a flat;
  • shorter leases become harder to sell;
  • mortgage lenders do not usually lend on shorter leases;
  • a lease extension widens the market of buyers and mortgage lenders making flats more marketable.

Q. What is the process to get a lease extension?

There are two ways of getting a lease extension:

  1. either by private agreement with the landlord (also known as the ‘voluntary route’); or
  2. by service upon the landlord of a Notice under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 (known as the ‘statutory route’).

Q. Can you think of any advantages of using the ‘voluntary route’

It can take less time to complete a lease extension in this way.

Q. Disadvantages of the ‘voluntary route’

1. You can end up paying more than you should for a lease extension;

2. the landlord will almost invariably want to introduce a substantially higher ground payable        under the terms of the new lease;

3. it can also take considerably longer to complete a lease extension using this route;

4. the landlord can demand a higher new lease premium before the new lease is completed.

Q. Advantages of the ‘statutory route’  

1.  It can take less time to complete a lease extension in this way;

2. the ground rent payable under the terms of the new lease will be reduced to nil or to what  is also known as a peppercorn;

3. this route will usually involve the flat owner arranging its own independent valuation of the property followed by a period of negotiation between its own valuer and the landlord’s valuer. This exercise should also give the flat owner a good idea of how much he/she should actually pay for a lease extension and avoid overpaying;

4. the valuation date is fixed on service of the statutory lease extension notice. The effect of this is that the landlord is stopped from being able to increase the new lease premium before the new lease is completed.

Q. Disadvantage of the ‘statutory route’

It usually takes a minimum of 4-6 months to complete a lease extension using this method, which can be substantially longer than a lease extension by way of the ‘voluntary route’.

A lease extension by way of the ‘statutory route’ can take even longer if agreement between the parties cannot be reached and it requires the involvement of the tribunal and or county court.

Q. How much is a lease extension likely to cost me?

The landlord will want payment in return for a new lease. This payment is what is known as the new lease premium. This sum is determined by a professional valuer.

In addition to this, the flat owner will need to pay its own legal and valuation fees as well as those of the landlord. This is the case in all statutory lease extensions and usually the case in most ‘voluntary lease extensions’ too. This is because it is the flat owner who is seeking a lease extension.

Q. A friend of mine recently advised me not to delay a lease extension because it would cost me more later on. Is this true?

Each year the term of your lease grows shorter the more expensive it becomes to extend. 

This particularly the case if your lease has less than 80 years left to run.  This is because for leases with less than 80 years left to run the landlord becomes entitled to charge flat owners an additional payment known as “marriage value”. Marriage value is the increase in the total property value following a lease extension. It is therefore very important to get a lease extension before the length of the lease falls below 80 years. A lease with 79 years left to run will cost substantially more than a lease left with 80 years left to run.   

Consequently it is not unusual for landlords to delay or ignore the requests of flat owners to lease extensions. Therefore, those flat owners that qualify often choose the ‘statutory route’ to extend their lease so as to fix the valuation date and to stop their lease becoming more expensive to extend.

Provided a flat owner qualifies, either route for a lease extension may be chosen.

Q. I have heard that my mortgage lender will need to consent to the lease extension process. What if I cannot get consent?

If you choose the ‘voluntary route’ to extend your lease then your solicitor will need to obtain the consent of your mortgage lender to the grant of the new lease. This does not usually pose a problem since a lease extension will bolster the security of the mortgage lender and so mortgage lenders are happy to consent to a lease extension.

There is no need for mortgage lender’s consent to be sought where the ‘statutory route’ is sought to extend a lease because the legislation makes provision for the lender’s interest to be automatically transferred from the existing leasehold title to the new leasehold title, which the Land Registry will allocate once your solicitor applies to register the completed new lease.

Q. I have found a property I love but it has a short lease. What would you advise?

Since you will not have owned the property for a continuous period of two years on completion of your purchase your options in this situation will be as follows:

Option 1: the seller can extend the lease by use of the ‘voluntary route’ and then sell the property to you with an extended lease; or

Option 2: provided the seller qualifies for a ‘statutory lease extension’ he/she can assign the benefit of a statutory lease extension notice to you on completion of the purchase of the property so that you effectively ‘step into the shoes’ of the seller and can complete the lease extension direct with the landlord post-completion of the purchase of the property. In this way you will not need to wait to build up the requisite two year period before qualifying for a lease extension. This in turn will have two advantages, namely:

  1. there will be a cost-saving for you, because you are likely to pay a higher new lease premium if you wait for two years and serve a lease extension notice in your own name because the shorter the lease becomes, the more expensive it becomes to extend and
     
  2. you will purchase the property with a long lease.

Q. Are all flat owners automatically entitled to a lease extension?

No. A flat owner will be excluded from the right to a lease extension in the following situations:

  • The lease is a business lease.
  • The freeholder is a charitable housing trust and the flat is provided by the charity as part of its charitable work;
  • The leaseholder has sub-let his flat on a long lease.

Also, the following buildings are excluded from the right to a new lease:

  • National Trust properties;
  • Buildings within a cathedral precinct;
  • Properties owned by the Crown.

Although the Crown is not bound by the legislation it is prepared to follow its principles and so willing to grant a lease extension.

We offer a fixed-fee service for lease extensions where the tribunal and or county court does not need to be involved. In our experience the majority of cases will not require the involvement of the tribunal as both parties will want to avoid the costs involved.

If you have any further questions or if we can assist you with a lease extension then please contact our head of lease extensions and enfranchisement team, Ahmed Anwar, on 020 7722 9909; email: ahmed.anwar@attwells.com or Will Oakes, email: will.oakes@attwells.com