Extending your lease could add considerable value to your property and make it easier to sell. Here we explain what’s involved in the legal side of the process.
When the amount of time remaining on your lease falls below 80 years your property can decrease in value at an alarming rate. As the time left on the lease decreases, it will be more expensive to extend the lease and can make it harder to sell.
Once you’ve spoken to your freeholder, you’ll need to appoint a solicitor or conveyancer to carry out the legal work for you. You should get at least three quotes to get an idea on price, but it's important to choose one who you feel comfortable can do the best job, not necessarily the cheapest. Getting recommendations from local web forums or family and friends should help you to decide.
Keep reading to find out more about extending a lease, and the costs involved.
There are two ways to extend a lease: ‘friendly’ or ‘non-friendly’. Whichever route you go down, you’ll need to pay a premium for extending it, and the amount you pay will depend on the property’s value and the time remaining on the lease.
‘Friendly’ lease extensions
A friendly lease extension allows things to proceed informally, with a lease extension of any period from one to 999 years and for a premium agreed with the freeholder.
Once the freeholder has agreed to extend the lease, you should arrange for the property to be valued by a surveyor. This will be used to negotiate how much you pay the freeholder for the lease extension. At this stage, the freeholder will usually look to increase the ground rent payable to bring it in line with modern day standards.
Typically, a friendly lease extension will take somewhere between four and eight weeks, but can take longer depending on the complexity of the lease, and how quickly the freeholder can respond to queries.
‘Non-friendly’ lease extensions
If the freeholder refuses to extend the lease, or you’re not happy with the premium or terms of the extension they’ve offered, you’ll need to organise a formal or 'non-friendly' extension.
To start this process, your conveyancer will serve a formal notice to the freeholder of the lease extension, known as a Section 42. By default, this extends a current lease by 90 years when granted. Ground rent is reduced to what’s known as a ‘peppercorn rent’, which effectively means that it’s free, and a strict timetable is followed.
At this point, the freeholder has two months to respond with a counter notice, which can be used to either accept or reject the offer, or state the premium they want. If an agreement can't be reached, even after mediation, you can apply to have the case decided by the Leasehold Valuation Tribunal (LVT).
Once an agreement has been reached, either independently or via the LVT, both you and the freeholder must enter into the new lease agreement within two months.
A non-friendly lease extension typically takes between four and 16 weeks to complete, but can take longer if there are complications or lots of back and forth negotiations.
When the lease extension has been agreed by all parties, the freeholder’s conveyancer will draw up a 'deed of variation' to end the old lease and confirm the new term, which your conveyancer will need to approve.
Your conveyancer may ask for certain clauses in the original lease to be amended or additional clauses added in order to bring the lease up to date with current requirements of lenders.
Once all queries have been resolved and everybody’s happy to proceed, all parties sign the deed, the premium is paid to the freeholder and your conveyancer will register the deed.
Try to reach a friendly agreement with the freeholder - this will save you stress, time and money in the long run.
Research the cost of your lease extension in advance - seek advice from a professional surveyor and use a lease extension calculator to gauge a fair premium.
Just choose the cheapest option - paying a little extra for an experienced conveyancer is money well spent.
Unknowingly buy a property with a short lease - if you're buying a property with fewer than 80 years on the lease, ask the seller to extend it.
Conveyancing is the legal process you have to go through if you’re buying, selling, remortgaging or extending a lease.
Typically, a sale or purchase in England or Wales will take around 8-12 weeks from the moment an offer is accepted to the point of completion.
However, the conveyancing process varies from case to case and it can take longer depending on the complexity of the transaction, the number of people in the chain (if applicable), and how quickly you can respond to queries from your conveyancer.
When you buy or sell a property, conveyancing typically costs between £500 and £1,500. But fees can vary depending on a number of factors including the firm you choose, the type and price of the property in question, and where it’s situated.
See our guide to conveyancing fees to find out more about the costs involved, or use our cost calculator to get a personalised quote with a cost breakdown.
A conveyancer is a legal professional who specialises in property law and can carry out the legal side of buying or selling a property, remortgaging or extending a lease.
If you own a leasehold property, you have a right to occupy the land or property with certain conditions in place, but it’s technically owned by the freeholder.
Find out more about the difference between leasehold and freehold properties.
An estimate of a property’s worth made by a surveyor or property specialist after a brief inspection of the property.
The surveyor will use their knowledge of comparable prices nearby. The valuation may include a 'minimum reinstatement value' which is the sum of money it would take to rebuild the property from scratch. Valuation surveys are only conducted in the interest of the lender, and you should always opt for a more comprehensive survey of your own to identify any issues which could affect you.
The Land Registry is the government body that keeps all records to registered land and property in England and Wales. It is divided into regional offices, each with its own Chief Land Registrar.