There are two ways to extend your lease. You can take a formal route, which gives you more protection, or an informal route, which could save you time and money.
It is worth starting with the informal route and switching to the formal one if you need to.
Informal route
Under this route, you can ask the freeholder whether they are interested in negotiating a lease extension. There is no obligation for them to respond or to agree to extend the lease.
If the freeholder does agree, then you can negotiate. But if you then cannot agree on the price or terms, and you meet the conditions, you can change to the formal route and go to the tribunal.
Formal route
If you own your flat, you can extend your lease by law if you meet certain conditions:
Under this route, you and the freeholder need to follow a procedure and timescales set out by law. It can be complicated, and we do recommend you appoint a valuer and a solicitor to assist you.
In brief, you serve a formal notice on your landlord outlining your claim and your terms. The landlord may ask you for evidence or request that you pay a deposit before submitting a reply, called a ‘counter-notice’. They may:
Get help
Lease extension can be a difficult process. We recommend you get professional help from a solicitor and surveyor with experience in this area.
Template letter for the informal route
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This is a difficult question to answer and depends on your personal circumstances.
The Act is not in effect and the new Government has indicated that it wants to implement the Act quickly. But the reforms will be implemented in stages and will require further consultation and secondary legislation. So it’s worth noting that reform is still some time off. Changes to the lease extension process may not be realised until 2025/26.
If you are a leaseholder considering whether to extend your lease or purchase your freehold now or to wait, you need to consider:
Will the reform make a lease extension cheaper for me?
If your lease is below 80 years, or if you have a ground rent above 0.1% of the value of your property, it will likely be cheaper. That’s because the reforms were designed to help people who have short leases below 80 years, by abolishing marriage value. It also helps people with high ground rents, by capping ground rents in the lease extension calculation – although the cap doesn’t apply in all cases.
Could the reform make a lease extension more expensive?
The aim of the legislation is to make it easier and cheaper for leaseholders to extend their lease or collectively buy out the freehold of their building. The abolition of marriage value and the removal of the requirement to pay the freeholders’ costs will make the process cheaper for many. However we cannot say for certain that all leaseholders will be better off at this stage.
This is because the Act doesn’t specify the rates that will be used to determine lease extension and freehold purchase prices. These “deferment and capitalisation rates” will be set at a later date and if they’re set at a lower rate than what is currently agreed between valuers, the cost of lease extensions could go up.
Until those rates are set, we won’t know whether the cost of lease extensions will come down for all leaseholders. If your lease is above 80 years or you have a low ground rent, the reforms could end up making a lease extension more expensive – though that is not the intention.
Can I wait for the reforms to be implemented?
Given the above, it is hard to give a definitive answer on whether you should extend your lease now. You should seek advice from a leasehold practitioner via the Law Society or ALEP.
If your lease is already below 80 years or you have a high ground rent, you will most likely be better off waiting for the law to change before extending. The removal of marriage value and the cap on ground rent used to calculate a lease premium will be of benefit.
Practitioners believe that for some leaseholders it is prudent to consider extending a lease now and not waiting for the reforms. This is especially if you need to sell in the next year or so or if you have 80 to 82 years left on the lease.
Does the length of my lease make a difference?
What you might choose to do will depend on factors like your lease length and your circumstances. For example:
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You could negotiate a lease extension, but you need to be aware of the risks. We recommend you get professional help from a solicitor and surveyor with experience in this area.
Leaseholders who own flats can either extend their leases under the law if they meet certain criteria (formal route), or by working out a deal with the freeholder (informal route).
The formal route will get you another 90 years added to your lease, and you will not have to pay ground rent, but the process takes time and there will be professional fees.
The informal route can be quicker, but it’s important to be careful. For example:
You could agree with the freeholder to reduce the ground rent, but the ground rent cannot be increased. Also, no ground rent should be payable in the additional years.
For example, if your current lease has £500 a year ground rent, and 70 years left, you could negotiate a lease extension of another 40 years and a reduced ground rent of £50 per year. If that was done then you (or whoever owns the flat) would pay £50 a year for the next 70 years, then no ground rent at all for the next 40 years. It might seem strange to think about what happens in 70 years, but it will affect the future value of the flat.
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There are ways for you to estimate the premium (price) of extending your lease, but it is best to get a valuation from a qualified surveyor who specialises in this area.
This is because the valuer – ideally a valuation surveyor who knows your local property market well and is experienced with this area of the law – can play an important role in the sometimes tricky process of extending a lease.
In addition to carrying out a valuation, they can:
It is best to get advice before making any offer to your landlord. The premium is not the only cost involved; you will also have to pay the landlord’s ‘reasonable’ costs, as well as your own.
Making an estimate
You can use our Lease Extension Calculator to get a general estimate of the premium.
This is based on compensating the landlord for:
Template letter
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Firstly, you will have to pay the premium for the lease extension.
Secondly, you will have to pay your landlord’s reasonable costs as they are legally entitled to. This is limited to legal and valuation costs e.g. the landlord’s valuation, legal costs of drawing up the new lease and checking your right to make the claim for a lease extension.
Thirdly, you will have to pay the legal and valuation costs for your own solicitor and valuer. If the case proceeds to the First-tier Tribunal (Property Chamber)/Leasehold Valuation Tribunal, your solicitor or valuer may charge you extra costs for representing you at the Tribunal.
You do not have to pay the landlord’s costs of going to the First-tier Tribunal (Property Chamber)/Leasehold Valuation Tribunal.
Lease extension can be a difficult process. We recommend you get professional help from a solicitor and surveyor with experience in this area.
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Generally, you will be a qualifying tenant, if your lease was more than 21 years when it was originally entered into.
However, even though you may be a qualifying tenant under the law, there may be other restriction that may prevent you from extending your lease.
This would be the case if your freeholder is the Crown, National Trust or part of a building within a cathedral precinct.
If you believe that this is your case then you may consider obtaining some specialist advice before you proceed.
Shared ownership leases will not qualify unless they have staircased to 100%.
Lease extension can be a difficult process. We recommend you get professional help from a solicitor and surveyor with experience in this area.
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The lease will have a start date referred to as the commencement date of the lease and will be for a term of years.
The fact that the terms of the lease has come to an end does not mean that you have to leave the property. Unless you or your landlord takes specific steps to end the agreement under the lease, it will simply continue on exactly the same terms.
You do not need do anything unless you receive a notice from your landlord. For the lease to actually come to an end either:
If none of the above have occurred you are still holding over as a tenant and it may still be possible to extend the lease or buy the freehold.
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This will depend on whether you carry out the process for a lease extension under the formal or informal route.
If you extend your lease formally then you will only have to pay a “peppercorn rent” which means no ground rent at all.
If you extend your lease informally by negotiating with your landlord, you may still have to pay ground rent depending on what you agree.
Lease extension can be a difficult process. We recommend you get professional help from a solicitor and surveyor with experience in this area.
More information you might find useful:
Still not found the answer?
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