Lease Extension Guidance & Costs

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We provide a fixed fee, efficient and experienced service for lease extensions helping you to successfully either process an agreed extension or negotiate with the freeholder whilst at the same time following the necessary statutory procedure.

In instructing Darlingtons, you can be assured of specialist and accredited expertise. We are members of the Conveyancing Quality Standard panel of the Law Society. As things stand, not many law firms have achieved the necessary standard, which also involves ongoing monitoring.

Procedure for lease extensions

There are set procedures required to force a freeholder to extend a lease, and these issues are becoming increasingly common as a prelude to selling a flat which has 70-80 years or less left to run.

Lease extensions are particularly common in London with the thousands of houses converted into flats. It is often necessary to start the statutory procedure to extend, based on 2 years ownership, whilst in practice, most extensions are agreed by consent. The reason for this is that the freeholder cannot resist the extension as long as you qualify to extend and comply with the procedure, and the premium will be within a fairly narrow band. Consequently, there is little real incentive for freeholders to be difficult, but some still are !

Our London lease extension solicitors & lawyers have undertaken many transactions extending leases and we often advise a group of leaseholders since it is common for many or all leaseholders to extend or enfranchise together. This saves time and is more cost effective. We can often provide a discount in the vent that a number of leaseholders extend together, so we do recommend that you make enquiries with other flat owners in your building to see if they want to extend their lease also.

Top tips for lease extensions

  • Extend before there are less than 80 years left to run - The general rule is that the shorter the lease the more expensive it is to extend. Anyone with a lease approaching 81 years unexpired should seriously think of extending it as soon as possible. As soon as a lease has less than 80 years to run, under the relevant legislation the Landlord is entitled to calculate and charge a larger amount, based on a technical calculation, and somewhat strangely known as “marriage value” which is payable to the landlord.
  • Check your eligibility - A tenant cannot use the legislation to force an extension unless he/she/they have owned the flat for 2 years. Ownership is relevant not occupation. The original lease needs to be long (over 21 years) and it should be residential, as opposed to commercial use. The legislation does not apply to some landlords such as the Crown, National Trust and charitable housing Trusts, although the Crown usually complies with the principles of it.
  • Instruct an experienced, specialist property solicitor - the lawyer will generally start the process by serving an Initial Notice on the landlord (although an informal, “without prejudice" offer may also have been made) , which will offer a premium for extending the lease. The process of extending a lease has strict time limits once the notice has been served and the Landlord may then serve a counter notice demanding a higher premium, with supporting evidence, or accept the offer made.
  • Valuer instruction - You will also need to instruct a valuer, probably a chartered surveyor, to put a value on the lease extension. He will use the valuation formula in the Leasehold Reform Housing and Urban Development Act 1993, as amended. Contact the RICS for a list of local surveyors who specialise in lease extensions. Get a quote in writing first. Most surveyors will charge a fixed fee to prepare the initial report which will avoid hidden extras and disbursements. This fee should cover the initial inspection of the property, reading the lease and making all the calculations. Obviously there are extra charges if the surveyor is asked to negotiate with the landlord or their agent or for any further work required if the valuation cannot be agreed. If they act for several flats in the same building they can usually offer substantial discounts so it's probably a good idea to team up together, if several of you are going down this route.
  • Be aware of costs - Once the Initial Notice is served on the landlord you will be responsible for his/her reasonable valuation and conveyancing costs, as well as your own. The Notice is also important in setting the valuation date.
  • Avoid agreeing other variations to the lease if possible - Under the Act you are entitled to a further 90 years on your lease with no ground rent payable on the original term or extension, but many if not most extensions are ultimately concluded by negotiation. It is quite common for a landlord to try and agree an increase in ground rent, as a condition for extending quickly and without waiting for notices to expire and/or applications to the Leasehold Valuation Tribunal has that is incorporated within the cost of extending. You still have to pay the service charge for the tribunal. However, such exchanges should be avoided if possible.
  • Increased value - Although there are costs involved, the upside is that after the lease extension, your property will usually be more valuable and saleable should you want to sell or remortgage. Buyers are often put off by short leases and mortgage companies won’t generally loan on properties with leases shorter than 60 years, although the exact cut off varies around the market.
  • Have finance and lender consent in place - There is not much to add under this heading, save that these extensions can often be done quickly, so have everything you need ready. In order to extend a lease a Land Registry application will be needed and this will consequently require formal consent from your lender, which clearly should be forthcoming without difficulty but may take a few weeks.
  • How long does it take to extend a lease ? - Subject to how efficient you are, plus your freeholder, his solicitor, your solicitor and your surveyor, this whole process could take from 6 weeks to 12 months.
  • Is there a going rate for the premium ? - Whether marriage value applies or not, it is possible to ascertain with quite a good degree of certainty the likely premium, and thankfully for tenants, whilst the typical premiums are not cheap, they do not generally run into the tens of thousands.

Our fees for extending a lease

For leaseholders, we charge a fixed fee of £750.00 plus VAT for dealing with the paperwork necessary where an extension has been agreed directly with the freeholder outside of the statutory legal framework.

Our fixed fees for dealing with service of the necessary notice on the freeholder and dealing with any counter notice served by or on behalf of the freeholder under the statutory procedures is £950.00 plus VAT plus disbursements. This does not include dealing with any necessary consent from your current mortgage lender which is an extra cost of £150.00 plus VAT, but does include approving the deed confirming the extension and also registration at the Land Registry.

We can also assist with negotiations on the premium to extend a lease and do so on a time spent basis, since each matter is different. If you are unable to reach an agreement with the freeholder after exhausting negotiations and the statutory procedure, you would need to apply to the Leasehold Valuation Tribunal to decide the correct premium. Our litigation department can assist with such applications, which are chargeable on a time basis.

Enfranchisement

 

The term enfranchisement relates generally to purchasing the freehold interest, which generally gives leaseholders, whether in a converted house or large block, greater control over management, and any premium paid to purchase a freehold can avoid the need for each leaseholder to pay a premium for extending the lease.

Please contact us today, whether you need to extend your lease or want to explore buying the freehold. Please either telephone us or complete our lease extension enquiry form.

James Swede
Senior Partner
0208 951 6661