The Lease Extension Process
Solicitors Specialising in Leasehold Extension Advice
If you want to know how extend your lease, you have 2 choices. A statutory or formal lease extension gives you the legal right to compel your freeholder to grant you an extra 90 years on top of your existing lease and at a zero ground rent (referred to as a “peppercorn rent”).
The other alternative is what is known as a voluntary or informal lease extension. There is no set process for this (but see below for more information).
Click here to read more about the difference between private and statutory lease extensions
Leasehold update – The Leasehold and Freehold Reform Act 2024 was passed by the UK Parliament on 24 May, 2024. it makes some fundamental changes to the lease extension processBut despite that it is not yet come into effect and could be delayed until 2025 or even later.
Click here to read the Leasehold Reform Latest News
How To Extend a Lease – the statutory route
To qualify for a formal lease extension you must satisfy the following 3 requirements:
- the original lease must have been granted for over 21 years,
- the lease should be for residential use and
- you must have owned the flat for a minimum of 2 years. You do not have to have been in occupation during these 2 years of ownership.
Note that there are very limited grounds for a freeholder to refuse to extend a lease – for example, general rules on leasehold extensions may not necessarily apply to government or National Trust owned properties.
Looking for expert legal advice on how to extend your lease? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice – with no strings attached.
The need for expert lease extension advice from specialist solicitors
Extending a lease involves a complicated area of law. Unlike, say conveyancing, formal lease extensions have a strict timetable – and getting the process or the timetable wrong means your application will fail, with potentially significant wasted legal and valuation costs as a result. The drafting the documentation, serving it correctly, negotiating the right premium are just 3 areas where it’s remarkably easy to make mistakes.
And although there are around 10,000 law firms in England and Wales, very few of them have solicitors specialising in this area. In contrast, we have over 25 years experience extending leases for clients nationwide. And our 5 strong specialist leasehold team handle up to 500 lease extension, right to manage and freehold purchase cases every year – and that number is growing.
In addition, we are members of ALEP – the only organisation for specialist leasehold lawyers, and are the only solicitors recommended for lease extension advice work by the HomeOwners Association (the country’s largest organisation representing the interests of the U.K.’s homeowners).
So whether you are looking for a formal or informal lease extension, you will be in safe hands with the advice from our team.
And if you’re thinking of instructing another solicitor to handle the process, make sure they are genuine specialists. Ask them how many lease extensions they handle every year.
However you do instruct, make sure that you always ask for a quote for the legal work.
Click here to read some reviews of our lease extension solicitors from satisfied clients
How much will extending the lease on my flat cost?
There are a number of different costs involved in any flat lease extension.
- Firstly you will have to pay your freeholder a “premium” to extend your lease – see below
- Secondly you will need to pay legal costs – both for your own solicitor and any solicitor appointed by your freeholder
- Thirdly, if you decide to go ahead with a specialist valuation of your own, you will need to pay the costs of your surveyor – and the reasonable costs incurred by your freeholder in appointing their own specialist surveyor to value the lease extension.
The Lease Extension Process – do I really need a surveyor to value my premium?
We strongly believe that you do. Your freeholder is almost certain to get a valuation and therefore they will know exactly how much your lease extension will cost. They may well ask for more than the valuation, or at least choose the top premium price on a range of valuation. Unless you have a good idea of what you should be paying, it’s very difficult to know when your freeholder is offering a fair price and when they’re trying to rip you off.
If you do decide to go ahead with a valuation, there are broadly two options. What is known as a desktop valuation is usually cheaper, because it does what it says on the tin. The surveyor will do the calculation from information they can find online – and will not actually visit your flat. This can lead to a less accurate valuation – because the condition and particular circumstances of your flat will affect the premium.
A desktop valuation therefore is much better than relying on an online calculator. However, it will not be as accurate as a proper physical inspection by a specialist surveyor.
Does my surveyor have to be a lease extension specialist?
The assessment of the premium required to extend the lease is based on a complicated legal formula. In our experience, the vast majority of surveyors, even if they are fully qualified chartered surveyors, struggle with these calculations, simply because they rarely come across them.
There are however a small number of surveyors nationwide who do this work on a regular basis. We have developed a nationwide unofficial panel of these specialist surveyors who we rely on to advise on the right price for your lease extension. We are happy to introduce you to 1 of the surveyors and if you prefer, to instruct them on your behalf as part of our one-stop shop service.
So to sum up, not getting a specialist valuation yourself (and one that is based on a physical examination of the flat at that) is risky. Our advice, don’t cut corners, it’s likely to cost you more in the long term.
Click here to read more about the importance of getting the right advice from a specialist lease extension surveyor.
How To Extend a Lease – the first legal steps
If you decide to go down the formal statutory route for a lease extension (which your freeholder cannot refuse) rather than the voluntary or informal route, then the first thing to do is to instruct an experienced leasehold extension solicitor.
Your solicitor will serve the section 42 notice on the freeholder informing them that you wish to extend the lease.
The formal process of extending a lease is subject to strict time scales. So you are best instructing a solicitor as soon as possible. And getting the right legal advice is important – so make sure that the solicitor you appoint has plenty of leasehold extension experience, because the vast majority of conveyancing solicitors simply don’t come across lease extensions very often.
The freeholder – time for a response
The freeholder will have 2 months in which, to reply to your leasehold extension notice.
This is the stage in the process where you need to get your own valuation of the premium you need to pay. When instructing a surveyor, always get a fixed fee for the work. The fee should include an initial inspection of the property, reading the lease agreement documents and doing all relevant calculations.
What is a Counter Notice?
When the freeholder receives your extension notice they will usually serve a counter notice. This will either be ‘friendly’ therefore approving the extension or ‘hostile’ which opposes the extension.
In order for the freeholder to issue a hostile notice he must have a legally valid reason, which are only available on very limited grounds.
If this does occur, your solicitor will advise you further on how to proceed.
How To Extend a Lease – the Negotiation Period
However, usually the notice will be friendly and after this is received, the next step in the process is that your solicitor will normally enter into negotiations with the freeholder’s solicitor.
Both parties will negotiate the terms of the extension and the amount of premium to be paid using the information provided by the surveyors appointed by both sides.
What happens if the freeholder simply doesn’t respond to my application?
When looking to extend your lease, if the freeholder refuses to respond to your notice, or fails at any other stage to cooperate with the timetable or even to cooperate with the transfer of the freehold itself, then the potential answer is the Vesting Order – an order made by the County Court.
Vesting orders are more commonly used where you simply can’t find your freeholder and despite your best efforts to locate the, they are simply missing. It might sound odd, but that does happen more than you would think. But the Vesting Order is also a very powerful tool if you have a difficult freeholder who simply isn’t cooperating. More often than not, the very threat of an application for a Vesting Order will encourage an awkward freeholder to cooperate with the process. That’s because the Vesting Order is bad news for the freeholder if you’re applying for a lease extension.
Any lease extension completed following a Vesting Order, is usually awarded on the same terms as the original lease. Therefore this is not ideal if you want to renegotiate the lease terms. But you will normally find that in granting a vesting order the County Court will accept a lower premium than might have been expected from a commercially minded freeholder. In short, the court is likely to follow the price for the premium which you put into your original section 42 application – which means that the freeholder is entirely removed from the process, cannot negotiate and cannot have any effective say on the level of that premium. And what’s more, you can apply to the County Court for your legal costs to be deducted from the premium otherwise payable to the freeholder, therefore potentially cutting the price you will need to pay for your lease extension and reducing the amount of money your freeholder will receive.
You can see why freeholders don’t like Vesting Orders.
Can you help me negotiate the premium for my lease extension?
Solicitors don’t usually negotiate the premium for clients. That’s because specialist valuers use a variety of formulae and much like in school, they must ‘show their workings out’ to one another.
The only instances where your solicitor might be involved is if the value of the lease extensions suggested premiums are close between the Notice of Claim figure and the Counter Notice.
We have had, for example, instances where our clients offer and the freeholder’s response is only say £3K apart, and where, in order to save costs, our client has instructed us to make a without prejudice offer to the freeholder to split the difference and settle in the middle. The Client then saves the cost of instructing the valuer to negotiate.
If formal negotiations are required, however, we would always delegate to the valuer for their specialist advice.
How To Extend a Lease – what happens in the case of a dispute with my freeholder?
When it comes to lease extensions, it is possible to apply to the First Tier Property Tribunal to resolve disagreements about any of the following:
1. The correct level of your lease extension premium
2. Whether or not the legal and surveyors’ costs claimed by your freeholder is reasonable.
Fortunately only a very small percentage indeed of applications to extend the lease actually make it to the property tribunal. And 1 of the reasons for that is that, in general terms, parties are responsible for their own legal costs – which can be substantial.
Click here to read more about the role of the First-Tier Property Tribunal in Freeholder Leaseholder Disputes
How To Extend a Lease – Finalising Your Lease Extension
Once the freeholder receives your notice, you will be responsible for all of the costs associated with the extension i.e. the valuation fee and legal costs. The notice will also set a date for the extension.
If you are extending your lease using the formal or statutory route, then you are entitled to a full 90-year extension to the length of your current lease, paying no ground rent. You will still be responsible for any service charges as agreed under the original lease.
The main benefit of looking to extend your lease is the increase in value that it will bring to your property.
Because of the reluctance of many major lenders to offer mortgages on short lease flats, short leases can be hard to sell. So if you extend for a further 90 years your flat becomes much more appealing to a purchaser.
Click here for a summary of mortgage availability for short leases
And the final step in the leasehold extension process is for your solicitors to apply to the Land Registry for the new lease to be registered.
I’m buying a leasehold flat – how long do I need to wait to extend my lease using the statutory route?
Normally, in order to qualify for a statutory lease extension, you will need to have been the registered legal owner for at least two years.
However if you are buying a flat, there may be a way to avoid waiting for that two-year period.
If the vendor has owned a flat for 2 years themselves, they can serve the initial Notice of Claim initiating the lease extension, before selling the flat to you. There is no cost to them for doing so. And on completion of your purchase, they can assign you the benefit of that Notice of Claim. That means that you can avoid the need to own the property for two years, and can proceed to complete the lease extension immediately, without delay.
NB our lease extension team regularly handle this scenario for those purchasing leasehold flats – and to make sure the lease extension goes through properly, we can arrange with the vendor’s solicitors to prepare the application documents ourselves, so we keep control and make sure the application is made correctly (most conveyancing solicitors rarely deal with lease extensions and if that is the case, there is a risk of them getting the application wrong).
How To Extend a Lease – the Informal Route
Negotiating an informal lease extension is entirely voluntary. If you choose this route, then you cannot force your freeholder to grant you a lease extension. That’s only possible if you use the formal or statutory route.
We usually recommend leaseholders use the formal route – because although the informal route does have its advantages, you are entirely reliant on the cooperation and goodwill of your freeholder. And that can be withdrawn at any stage, leaving you with wasted legal and valuation costs and potentially a bigger premium to pay if your property has increased in value in the meantime.
What’s more, your freeholder need not even acknowledge an informal request for lease extension, let alone negotiate a premium.
However, there are occasions when an informal lease extension may be more appropriate. One particularly good example of that is if you are strapped for cash and are not able to stump up the money for a full 90 year extension. In this case, a shorter lease extension, at a lower price might be appropriate – if your freeholder is willing to accept it.
And even if you choose the informal route, it is still important to seek specialist lease extension advice and a valuation of your own from an experienced surveyor.
Can Executors Apply for Lease Extensions?
In short, yes they can.
There are some restrictions though, and executors of an estate have the right to submit a formal notice of claim for an extension to a lease on a residential leasehold property within two years of probate being granted. The person who has died must have qualified for to extend the lease in their own right, meaning that they must have owned the property for at least two years at the time of their death.
These rules mean that the executor has the option of going ahead and extend the lease themselves, or can start the process and then put the property on the market. As long as the notice of claim has been submitted, this can then be signed on completion to whoever buys the flat or house. This means that rather than having to wait the statutory two years before applying for a lease extension in their own right, purchaser can continue with the lease extension application straight after buying the property. Buying a short lease property in this way saves the potential purchasers money, and not only increases the value of the property but also its attractiveness to buyers.
Click here to read more about your lease extension.
