Extending Your Lease

The extra 90 years and the ground rent are the only things covered by your statutory lease extension.

Other issues in your lease that could affect the sale of your property will not automatically be rectified.

It may be possible to negotiate other amendments at the same time as your statutory lease extension but you may be charged more for these.

You have the legal right to extend your lease under the Leasehold Reform Housing & Urban Development Act 1993 (as amended by subsequent Acts).

To be eligible you must have lived in the property for at least two years. The lease must be a ‘long lease’ (21 years or more when originally granted). These are the only legal requirements in most cases.

You will not be eligible if:

• the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions
• it is a business or commercial lease.

This is how to extend a lease…

1. You instruct a leasehold solicitor.

2. You instruct a valuer to help you know how much to pay your landlord/freeholder for your lease extension. Your valuer will want to inspect your flat.

3. You serve a Notice of Claim on your landlord. This notice:
- outlines your intention to compulsorily purchase a lease extension
- offers the price you are willing to pay
- specifies a date by which you expect to get a response from your landlord (you must give them at least two months to respond)
- outlines the other terms on which you wish to be granted a lease extension – this is an opportunity to include other amendments beyond the extra 90 years and the peppercorn rent.

4.  You may then receive notice(s) from your landlord asking you to:
- prove you have owned your property for the minimum two-year period
- pay a 10 per cent deposit of your offer figure (or £250, whichever is the greater) within a set period of time.

5.  The landlord instructs a valuer. They will want to inspect your flat to calculate the value of the lease extension (just as your valuer did for you).

6. The landlord must send you a Notice in Reply by the date you specified in your Notice of Claim. The Notice in Reply will either admit or deny your legal right to extend your lease. 

Usually the Notice in Reply admits your right. If so, the landlord will either:
- accept your offer figure
- propose a counter-offer figure (this is more common).

Your valuer will advise you whether the figure offered by the landlord in the Notice in Reply is fair.

The Notice in Reply will also deal with the other proposed terms of the lease, aside from the price.

7. Negotiations will be needed if your landlord has proposed a counter-offer or disagrees with the other terms of the lease you have proposed.

Your valuer and your landlord’s valuer will try to agree a price acceptable to both you and the landlord. This usually takes at least two months (and can take as long as six months).

Around 98 per cent of lease extension cases settle by negotiation within the allotted six-month time period.

8. Agreement – if the price and the other terms are acceptable then the wording of your new lease and the professional costs can be agreed. Your new lease will then be registered at the Land Registry.

9. If there is no agreement then you can apply to an independent tribunal to decide. This tribunal is an expert body specialising in lease extensions and other similar matters.

You must apply to the tribunal before the expiry of the six-month period after the landlord’s Notice in Reply.

If you miss the deadline, your Notice will be considered withdrawn and you would have to start again from square one. Under the law you would have to wait at least a year to do so. Starting again would have cost implications for you.

Yes. If you are the executor of an estate then you have the right to apply for a statutory lease extension – as long as you do so within two years from the Grant of Probate.

Extending a lease can be a useful tool for an executor who is under a legal duty to maximise the value of the estate he or she is administering.

How much does it cost to extend a lease? This will depend heavily on how many years are left to run on your lease.

The critical number is 80 years – leases cost much more to extend after they fall below 80 years. This is because you will have to pay 50 per cent of the flat’s ‘marriage value’ on top of the usual lease extension price.

What is the marriage value? It’s based on the fact that extending a lease adds value to the property. The landlord is entitled to half this value if the lease has dropped below 80 years!

How much do solicitors charge for a lease extension? Our legal fees at Coles Miller will depend on the type of lease involved, the title structure and other factors. We can provide an accurate quote on request which will take into account these considerations.

But remember that legal fees are just one part of the overall budget. The average cost of extending a lease can also include:

• marriage value (the amount you must pay your landlord for the anticipated rise in the value of your property after you have extended the lease)
• your valuer’s fees
• the landlord’s solicitor’s fee and valuer’s fees (you instigated the procedure so under leasehold law you must pay the landlord’s fees)
• disbursements such as tribunal fees, Land Registry fees, court fees for serving notices.

How much you pay will take into account the predicted value of your property after you have extended your lease. So it is vital to instruct a suitably qualified and experienced surveyor to carry out the valuation.

Using an online leasehold calculator is a popular way of working out how much it will cost to extend a lease – but beware! These calculators can be inaccurate or can fail to provide the full financial picture.

This is why Coles Miller does not recommend them. They do not take into account various factors that can (and usually do) push up the cost of extending a lease.

These calculators work on the basis of three figures that you input:

• number of years remaining on the lease
• annual ground rent
• value of your flat (or other leasehold property).

To start with, the annual ground rent and the value of your flat can sometimes be hard to ascertain.

And there are lots of variables which the calculators do not consider – not least your landlord’s legal costs.

Our specialist residential leasehold solicitors always recommend that you budget sensibly for the other parties’ costs.

Here are some of the factors that can increase the cost of extending your lease…

Some residential leases are structured on the basis of three tiers:

• the freeholder (the landlord)
• the head leaseholder (usually a management company)
• the individual leaseholders (the flat owners).

A head lease can make life easier for the freeholder. They need deal with only one party (the management company) instead of lots of individual leaseholders. They collect one head lease ground rent payment instead of having to chase small ground rent payments from lots of individuals.

Unfortunately, it can push up the cost of extending a lease because notice must be served on two parties – the freeholder and the head leaseholder. It also means there are two sets of costs that you must fund instead of one.

This head lease structure dates back hundreds of years and has traditionally been associated with old landed estates but it is also becoming popular with freeholders who own more than one block.

Head leases are common in prime central London (such as Knightsbridge, Belgravia, Mayfair, Chelsea) and also in other parts of the country, including the Bournemouth area.

This is a similar situation to the head lease structure (with similar issues over costs) but in this case the three tiers look like this:

• the freeholder (landlord)
• the individual leaseholders (the flat owners)
• the residents’ management company, entered to the leases as a ‘third party’.

Again, by law you must serve two notices – one on the freeholder, one on the management company – even though it feels as if you are serving notice on yourself!

The fact that there are two other parties (instead of simply a landlord) can again push up your legal costs.

Serving notice to extend your lease means committing to pay the other parties’ costs. Sometimes they know this and may try to take advantage.

Some freeholders have a reputation for being difficult or expensive to deal with. This can dissuade leaseholders from trying to extend their lease or buy the freehold.

These landlords and firms may also take the opportunity to sneak clauses into the small print of your extended lease: such as linking the ground rent to inflation or introducing regular rent reviews.

This is another reason why you need solicitors with specialist expertise in residential leasehold property law to fight your corner.

Worried that the other side may be demanding unreasonable costs? You may apply to the First-tier Tribunal (Property Chamber) (FTT) – formerly the Leasehold Valuation Tribunal (LVT) – for costs to be assessed/determined.

But going to the FTT usually means incurring further costs. Make sure it’s worth the cost of proceeding.

This will depend on how your lease has been set up. The process will take longer if there is a head lease or a third-party lease structure.

Using specialist leasehold solicitors like the team at Coles Miller can make the process quicker because we know how to save you time (and therefore money).

Years of specialist experience mean we can identify potential issues in advance and deal with them on your behalf.

A typical lease extension where there is no head lease or third-party structure can generally take between six and 12 months to complete.

That said, the parties and their professional advisors certainly have the ability to speed up the process.

Tribunal or court proceedings are required only in rare cases. If they are required they are likely to lengthen the process.