HomeOwners Alliance logo

Become a member today to access our home helpline, discounted conveyancing, expert advice & legal service

mortgage news this august

Should I extend my lease?

If your leasehold is getting short – don’t despair. You now have a legal right to extend it. However it could cost you tens of thousands of pounds, be very confusing and surprisingly stressful. It pays to be prepared.

The HomeOwners Alliance can provide guidance on extending your lease. To see how we can help, find out more about becoming a member of the HomeOwners Alliance.

What does extending the lease actually mean?

Your leasehold has a certain term or length (such as 85 years), at the end of which the property will revert to the freeholder. It is a totally unfair relic of feudal laws, which you avoid by adding extra years to the length of your lease – that is, extending your lease. You can do that either by entering into a mutual agreement with the freeholder, or exercising your legal right. If you exercise your legal right to a lease extension, it will add 90 years to the length of the lease (and reduce the annual ground rent to nothing – or in legal parlance, a “peppercorn”).

Should I extend my lease? 

Before you enter the legal minefield of a lease extension, you need to decide whether it is worth the effort and expense. As a general rule of thumb, if the lease is less than 90 years you should almost certainly try to extend it. This is because:

  • Properties with shorter leases are less valuable than ones with long leases (this is particularly true if leases are below 80 years)
  • Properties with shorter leases can be more difficult to get a mortgage on, because mortgage companies will worry that its value might decline and so won’t be good security
  • Properties with shorter leases can be more difficult to sell

Why would I not want to extend the lease?

Depending on your circumstances, it might not be worth getting involved in the expense and hassle of extending your lease if:

  • You have a long lease already (over 90 years), there is probably little benefit to extending it (unless you want to get rid of ground rent)
  • You are strapped for cash and mortgaged to the hilt. Lease extensions can be very expensive (many thousands of pounds), so you need to work out first whether you can afford it. Some people can be trapped in short leases, unable to afford extending them.
  • You are only planning to be in the property a couple of years before moving on (unless you need to extend the lease to make it attractive to buyers)
  • You plan to buy the freehold in its entirety (owning the freehold of a house makes the question of extending the lease redundant; in the case of flats, leases may still need to be extended but if you and your neighbours are the freeholder it is easier and cheaper to do this)
  • You are old and not going to outlive the term of the lease. It can be quite rational just to let your heirs inherit the problem

If you do want to extend – act quickly!

As the lease gets shorter, the cost of extending the lease gets more expensive at an exponential rate. This is particularly true for leases of less than 80 years, where the cost of lease extension really starts to bite.

At about 60 years, the cost of extending the lease increases by about 1% of the value of the property each year – i.e. if the property is worth £250,000, the bill for extending the lease will go up about £2,500 a year. When the leasehold gets down to zero years, it is practically valueless as the whole property reverts to the freeholder (though for a certain period after expiry of the lease you may still have a right to extend the lease).

So, if the term of your lease is less than 80 years, you should act as quickly as possible before it gets too expensive. And if your lease is less than 90 years, you should act quick enough to ensure you don’t end up with a lease of 80 years!

Am I allowed to extend my lease?

Yes – if you’ve owned the property for at least two years you are entitled to demand a 90 year extension to be added to your existing lease from your freeholder. You only have to have owned the property, so you can still apply if you’ve been living somewhere else. If you have owned the property for less than two years then:

  • You can still enter a non-statutory agreement with the freeholder, if you can persuade them
  • If the person you bought your property from had started the lease extension process, they might be able to continue it – but you will have had to ensure that the right was passed on to you when you bought the property

If none of this applies – you simply have to wait two years.


Leave a comment




* required

9 Comments

  1. […] means that you just have a lease from the freeholder (sometimes called the landlord) to use the home for a number of years. The […]

    Pingback by My Experience Buying And Selling A Leasehold Property — August 6, 2017 @ 11:16 pm

  2. I live in a retirement property, which I own, and have asked the management company to extend the lease as it now only has around 68 years left. The management company have now come back to me and advised that the lease cannot be extended (reason not explained) but they can provide me with a new 99 year lease (same length as original lease). By doing this the management company will still be able to charge me ground rent at £100 p/a. Having read your literature on the matter and other publications surrounding the subject of lease extensions I wonder what the circumstances would be where the management company could not extend my lease by 99 years thus giving me a 167 year lease (ie 99+68) and reduce my ground rent to zero. Thank you in advance of your advise.

    Comment by Pamela Black — March 18, 2016 @ 3:19 pm

  3. My mother is considering to buy two bedroom maisonette house but the leasehold is only 40 years,by how many years can she extend the lease?

    Comment by george fahim — December 16, 2015 @ 9:15 pm

  4. Hi Maureen,

    Please take a look at our guide on extending your lease. It has a helpful calculator which can estimate how much it will cost you.

    Thanks,

    Annie
    HomeOwners Alliance Team

    Comment by Annie — July 30, 2015 @ 6:54 pm

  5. I own part of the freehold of the flat that I own and it has approximately 72 years left on the lease as I am part of the freehold how can I extend it and how much will it cost me?

    Comment by Maureen Ryan — July 30, 2015 @ 6:40 pm

  6. I have recently had an offer to buy a leasehold property accepted. The flat was a freehold previously. After a six month wait, the seller’s attempt to register the property as a leasehold was rejected. I am not yet sure why it was rejected, but I have been told I can still buy the property and move in. I would then have to apply for a leasehold myself.

    What are the consequences of living in an unregistered property? Is this common practice?

    Comment by Steve Keane — June 30, 2015 @ 4:35 pm

  7. There are 4 flats in a grade2 listed building .3 flats have approx 83years left on their lease.The elderly free holder lives in the groundfloor flat 4.Can we extend the leases or better still buy the freehold

    Comment by raymond brown — June 29, 2015 @ 7:54 am

  8. My 83 year old Mothers house has 60 years lease left
    She cannot afford to extend it
    What consequences will the short lease have when I sell the property?
    It will placed in my name as per her last will indicates

    Comment by Denise Troman — July 16, 2014 @ 6:03 pm

  9. For sure, if you have just over 80 years left on your lease, you will want to try and extend it as soon as possible. When you go past this, the marriage value comes into effect and you’ll end up paying an added fee.

    Comment by Bonallack and Bishop — June 5, 2014 @ 12:28 pm

Sign up to our FREE newsletter for latest advice, services and money saving offers

Sign up now

×

Don't Miss Out!


Sign up to our free newsletter for latest advice, services and money saving offers

Sign Up Image

Do you have questions about your leasehold extension? We can help you understand the steps and avoid nasty surprises. Find out more about the benefits of becoming a member of the HomeOwners Alliance now

 

 Find out more>> M