Lease Extension – Frequently Asked Questions

Why should I extend my lease?

1. If your lease is well in excess of 80 years there is no pressing need to extend your lease. The longer you leave it though, generally speaking, the more you are likely to have to pay for a lease extension to the freehold landlord. If it is likely to affect you in the future then it is worthwhile getting it done sooner rather than later.
2. For shorter leases of around 80 years or less remaining, you are strongly advised to extend your lease because it will have a greater negative impact on the value of your flat the longer you leave it.

What if I own a share of the freehold?

If you own a share of your freehold you can grant yourself a new 999 lease for nil ground rent presuming the other freeholder owners agree. Of course there will be no need to serve a statutory notice in this situation.

Is it better to buy a share of the freehold or to extend my lease?

If you buy the freehold with the other leaseholders then presuming the other freehold owners agree, you could grant yourself an extended lease. You can only buy a share of the freehold if there are at least half of the flat owners in the block who also want to purchase the freehold. Buying the freehold might not therefore be an option. You may not wish to have a say in the management of the building if it is already well run and for that reason you may not wish to purchase a share in the freehold, in which case a lease extension would be better for you.

Can I extend my lease without having to serve a notice?

You do not have to serve notice and use the statutory procedure to extend your lease. Beware however that unless the price and other terms are extremely favourable to the freehold landlord they are unlikely to want to proceed to grant you a new lease and have no obligation to do so. Even if non-statutory terms are likely to be agreed it is still recommended you serve notice as this will ensure the landlord responds within 2 months and it also fixes the date on which the lease extension can be valued, which is the date you serve the notice. Whether you have negotiated your own terms or not it is always recommended that you take your own legal and valuation advice before signing a new extended lease.

Why should I serve the notice rather than approach the freehold landlord informally?

If followed correctly the statutory procedure works to the benefit of the leaseholder because:-

1. The date you serve your notice will be the date on which the valuation of your extended lease is fixed. From the date you serve your notice there is no more need to worry about your lease getting shorter.
2. Whether you negotiate a lease extension without serving notice of your right or not your freehold landlord will expect his own costs to be paid by you. If they seem high you will only be able to refer to them to the Leasehold Valuation Tribunal for them to decide whether they are reasonable or not if you have served the statutory notice.
3. If the price the landlord wants for the lease extensions seem unreasonably high, you will only be able to refer to the Leasehold Valuation Tribunal for them to decide what the price should be if you have served the statutory notice.
4. The landlord is tied in to the statutory time limits. If the freehold landlord fails to serve a counter-notice in the time you have given which must be at least 2 months then you are entitled to an extended lease at the price you have offered in your notice.

Why should I take professional valuation advice?

Generally speaking it is recommended that you take valuation advice from a surveyor because it will bring you peace of mind to know that you are not paying more than you should be to the freehold landlord for the lease extension. A leaseholder’s notice claiming the exercise of their right to extend the lease can be deemed to be invalid if the amount offered is unreasonably low and that is a pitfall for those proceeding without professional valuation advice. Your surveyor will if needed, conduct negotiations on your behalf and is far more likely to succeed in securing a reasonable price than if professional advice had not been taken. We know several local experienced surveyors and would be happy to recommend a good one for you.

How long will it take?

This can depend on how quickly a price can be agreed and also how quickly your landlord is willing to proceed. Realistically there is going to be some negotiation and the statutory time frames allow for that. From beginning to end the process is likely to take between 4 and 18 months. If having followed the statutory procedure, between 2 and 4 months following agreement of all the terms, the landlord has still not granted the lease extension, an application for a vesting order by which you will be granted the lease from the court can be applied for, but only about 5% of cases ever reach that point.

How much will it cost?

Aside from the price paid for the extended lease you should budget between about £700 to £900 for a surveyor and the same again for your solicitor, but don’t necessarily go for the cheapest option. A more experienced surveyor might cost more but is likely to get you a better deal in the end and there are many pitfalls in the statutory legislation that an inexperienced legal advisor can fall foul of. You will also be required to pay the landlord’s legal and surveyor costs. These should be in the region of £1500 presuming the matter proceeds without undue complication. If the costs seem unreasonable they can be referred to the Leasehold Valuation Tribunal for a decision on what they should be.

When do I have to pay?

You will not need to pay anything until the lease extension is completed except:-

1. The surveyor’s fee which is usually paid shortly following receipt of valuation advice and
2. A deposit to the freehold landlord of 10% of the amount you offer for the lease extension or £250, whichever is the greater. This is paid within 21 days of receiving a request from the landlord following service of your notice to claim a lease extension.

I want to sell my flat quickly but I also want to extend my lease before I sell – Is there a short cut?

Due to the requirement of owning your flat for two years, if your lease is in need of extending most buyers and indeed mortgage lenders will want there to be sufficient length on the lease. You should make it a term of your sale contract that you will serve the notice of your right to extend the lease on to the landlord and assign the benefit of the notice to your buyer on completion of the sale. That way your buyer will not have to wait for two years before exercising their right to extend the lease, which could be critical if the lease had say 81 years left on it. Depending on the length of the lease, this solution might not always be acceptable to the buyer’s mortgage lender though.

What happens if the landlord changes after I have served the notice but before I complete the lease extension?

There is no obligation on anyone buying the freehold to proceed with granting the new extended lease to you if the notice has not been served on them. For this reason it is recommended that your notice is registered at the land registry. This puts anyone buying the freehold on notice that you have exercised your right to an extended lease and they must complete the process of granting you a new extended lease. We will include this within our service so there will only be the additional £40 land registry fee to pay to register the notice.