Step by step guide to extending your lease
Extending your lease can be a long and complicated process. We run through what's involved, costs and how to get the right expert help so you can take charge of every step of your lease extension and avoid the common pitfalls.
Before I start, how much will it cost me to extend my lease?
It depends on the value of the property, the number of years left on the lease, the annual ground rent, the value of improvements done to the property paid by the leaseholder and external factors such as expected rate of returns on investments. It is a complex calculation, but also a subjective one which means it is open to negotiation – or decision by a tribunal.
While you can get an idea of the cost of buying up more years (referred to as the premium you have to pay to the freeholder for the extended years) with our lease extension calculator approaching a valuation surveyor with experience of lease extensions will be worth the investment and stop you paying over the odds for your extension.
On top of the cost of buying the extra years on your lease (the premium) you have to pay:
- The costs of getting legal advice (your solicitor)
- The lease extension valuation report (a surveyor)
- Your freeholder’s reasonable legal and own valuation costs (yes, you are required by law to pay these)
- Land Registry fees
Do I need legal expertise to extend my lease?
Yes! It can be tempting to enter into informal negotiations with the freeholders to extend your lease. By coming to an informal arrangement, you usually only have to pay your legal and valuation costs, while taking the formal route will mean you have to pay both yours and the freeholder’s costs. But if ever the phrase “false economy” applies, it is here! You may be saving on legal costs but you could be paying thousands more for the lease extension than you should be and, in the worst case scenario, make your home unsaleable.
The main issue is that with an informal extension the freeholder can make changes to the small print of the agreement to their advantage, for example adding ground rent rises. When you choose the formal statutory route, your ground rent is reduced to nothing. Another trick is to only grant you an extension back up to 99 or 125 years, whereas with the statutory route you will get your existing term plus 90 years.
Doing things formally also affords you better protection should things go wrong. As long as you’ve gone down the formal “statutory” leasehold route, if there are any disagreements in terms of costs or other disputes you can take your case to a property tribunal. There are also time limits with the formal route to lease extension so your freeholder can’t drag their feet.
What are the steps to extending my lease?
- Step 1 – Inform the freeholder of your desire to extend the lease and that you will be pursuing the statutory route.
- Step 2 – Appoint a lease extension solicitor with expertise in the field and who is a member of the Association of Lease Extension Practitioners (ALEP). Get quotes and compare costs. Our partner lease extension solicitors can provide advice you can rely on. Get in touch today.
- Step 3 – Find a valuation surveyor with expertise in leasehold extension legislation and the local property market. Some solicitors, including our partnered firm Bonallack and Bishop, can put you in touch with surveyors they trust.
- Step 4 – Make a formal offer. You will have to serve tenants’ notice – your solicitor will able to take care of this.
- Step 5 – Pay the deposit if one is required by the landlord. This will either be £250, or 10% of the lease cost in the tenants’ notice, if that exceeds £250. If the landlord does require a deposit, this will have to be paid within 14 days, so it’s important to have this money readily available.
- Step 6 – Negotiate a price. Your solicitor will advise or can handle this.
If the freeholder doesn’t accept the amount you’ve offered you will have to negotiate. Then if you still can’t come to an agreement, you will have to apply to the First Tier Tribunal (Property Chamber). While cases going to the tribunal are relatively uncommon, they can be time-consuming and expensive, so it’s best to avoid this if you can.
How long will it take to extend my lease?
The process of extending your lease normally takes from 3 to 12 months, and it can be made quicker by efficient valuers, solicitors and other professional help, so choose these people wisely.
How can I keep lease extension costs down?
To help reduce the cost of extending your lease:
- Extend your lease as soon as possible – especially before the 80 year point when it becomes more expensive to buy up more years
- Appoint a specialist solicitor for the right legal advice
- Instruct a specialist surveyor – so you get the right valuation premium and don’t pay over the odds
Is it worth trying to buy the freehold instead of extending my lease?
It could be worth buying the freehold on your home so that you own it outright. But there are complicated legal procedures and legal costs involved in this process. You will have to get over half of all the leaseholders to agree, which could be difficult if, for example, you live in a building divided into apartments. Read more about what to consider in our guide Should I buy the freehold
Our chosen lease extension solicitors provide FREE initial telephone advice and a FREE ESTIMATE of how much your lease extension is likely to cost you – which will include a very rough estimate of the likely price of your premium, as well as the legal and valuation costs. Find out more and contact them today