Lease Extensions

If you are a leasehold flat owner and have owned your property for over 2 years you are entitled to extend your lease by 90 years (i.e. on top of your existing term) and to extinguish your ground rent.

If there are less than 85 years remaining on your lease it is advisable to extend at the earliest opportunity before the cost of extending rises. At under 80 years, the premium will then include marriage value which will increase the premium.

If you are concerned about your lease or are interested in extending we can offer you clear and professional specialist advice. Please contact our leasehold department for a free preliminary consultation on 01273 20 19 80 (opt 2).  Alternatively please complete the form on this page and we will respond within 24 hours.

Lease extensions for council property

If your freeholder is Brighton and Hove Council, click here.

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Frequently Asked Questions

  • What is the procedure for extending?

    The first thing you will need is valuation advice.

    If you have had an offer from the Freeholder for a lease extension, you still need valuation advice. What is on offer from them may not be fair or what you are entitled to under the Act.

    Your Freeholder’s valuation may be over-inflated and the terms of the lease extension may not be satisfactory - (for example, Freeholder’s often wish to raise Ground Rents without making adequate concessions).

    After we have undertaken the valuation and reported to you, we can assist with how to negotiate the matter, either informally or formally.

    If we are unable to settle the matter informally your solicitor can serve a section 42 Notice. The section 42 Notice represents your formal offer and is the first stage of the legal process for extending your lease. Once a Notice is served, both sides must adhere to a strict timetable and to rules concerning costs. Austin Gray can recommend specialist solicitors.

    Your Freeholder is entitled to have the lease extension formally valued at this point and he will serve a Counter Notice. You are liable for the Freeholder’s 'reasonable costs’, including his valuation fees and his solicitors fees.

    After the Freeholder serves his Counter Notice there is a period of two months in which the valuation surveyors from each side will negotiate the price.

    Most lease extensions are settled at this point, however, if an agreement cannot be reached the price will be settled by the First Tier Tribunal.

    Once the price has been agreed, the Freeholder’s solicitor will draw up the new Lease or Deed and send it to your solicitor.

  • At what term does a lease become 'short'?

    Leases under 80 years include what is known as Marriage Value - this is an additional element, so extending before your lease falls below 80 years is advisable.

    As the length of the lease diminishes, the cost of extending rises steadily year on year accelerating as the lease approaches say 75 – 70 years. If you are able to extend close to the 80 year mark then you are much more likely to find the costs manageable.

  • Can I pass the costs of my lease extension onto my buyer?

    To be entitled to a lease extension under the Act you have to have owned the flat for 2 years.

    So, if you have a short lease and you sell it, the buyer will have to wait for 2 years before they are eligible. This factor, amongst others, may affect the saleability of your flat and you will have to deal with it to make the flat saleable, particularly if you have a short lease.

    You can serve a Notice and then assign your right to extend your lease to your buyer if you wish. This means they will not have to wait for 2 years.

    In order to do this it will be necessary to first serve a section 42 Notice. Once you have served a Notice you can exchange on your property and your buyer can continue the lease extension process. Legal advice is required on the assignment of a Notice.

    As to who bears the valuation and legal costs this is a matter for negotiation between buyer and seller and will impact on the price paid.

  • How long will it take to extend?

    After receiving your valuation report, a lease extension may be agreed quickly by informal negotiation within a few weeks, if the Freeholder is willing.

    Unfortunately, there is often a significant discrepancy between the Freeholder's opinion of value and that of the flat owners valuation surveyor. In this case you will need to serve your section 42 Notice. The Freeholder has two months from the time you serve your Notice to have the lease extension valued by another valuer and to serve their Counter Notice. Once the Counter Notice is served there are a further two months of formal negotiations. The price is, in most cases, settled at this point between the valuers. You should expect to pay additional fees for these negotiations. The whole process should take less than six months.

    If the price cannot be settled between the valuers it will be settled at Tribunal. Attending Tribunal has significant fee implications and can be time consuming. It is, however, very rare to resort to Tribunal in lease extension cases.

  • What are the costs in professional fees?

    Our valuation fees are quoted for individually. These may vary depending on location, type of lease, number of head leases and other issues. Please call our professional department on 01273 20 19 88 for a quote.

    If an informal agreement cannot be reached it is frequently necessary to follow the statutory route. The statutory process has further fee implications which you will need to budget for. As well as your own valuers costs, (Phase 1 fees), your solicitor will charge you for serving a section 42 Notice. You will also be responsible for your Freeholder’s valuation and legal fees. Lastly, there will be a fee for any formal negotiations undertaken by your valuer, (Phase 2 fees). We can provide you with a quote for our fees on request.

    In the unlikely event that the matter progresses to a Tribunal, there will be further valuation fees, (Phase 3 fees), the extent of which will depend upon the nature of the dispute.

  • Can I buy a ‘share of freehold’ instead of a lease extension?

    Usually, this is only possible with the agreement of the other Freeholders. There is no legal right for an individual to acquire a share of freehold - only when you are Enfranchising with a group of other flat owners.

    However, the other flat owners may have previously purchased the freehold leaving 1 or 2 flat owners on their existing lease terms. If the Freeholders agree, then we can value the position which will usually be the value of the lease extension plus an additional amount to lift your interest up from a long leasehold interest, (i.e. after the extension), to a share of freehold.

    If you are interested in purchasing your freehold by means of collective enfranchisement - (i.e. a group freehold purchase by a majority of leaseholders in your block) - then please click on ‘Buying Your Freeholds’ in the main menu.

  • Are there any alternatives to extending the lease?

    It may be possible to sell very short lease flats to cash investors - however, the asking price would need to be heavily discounted to reflect the lease length. Buyers would expect the price to reflect not only the lease extension cost but also the fees, the delay of 2 years and the risk element of ending up in a Tribunal. Attempting to sell a short lease without extending is rarely advisable as it has become increasingly difficult to find any buyers for short lease flats. However, if you have no alternative cash buyers for short lease, flats can sometimes be found at auction providing the guide price reflects the lease term.

  • How much will the lease extension cost?

    It is impossible to give a guide as much will depend on the value of the flat, the lease length, the ground rent level and the increments and the review clause, including the market value of the property.

    Valuation advice is required from a Specialist Valuer with experience in this particular field.

    It should be remembered that the longer you leave the situation, the shorter the lease term becomes and the more expensive it will be, BUT that all of your expenditure will be recovered in the increase in value of your flat.

  • How is a lease extension valued?

    There are three main elements to a Lease Extension valuation. The first two elements together represent the Market Value of the Freeholder’s interest in the flat. The third element - (Marriage Value) - represents the Freeholder’s share of any profit deriving from the improved value of your property as a result of the lease extension.

    1. Ground Rent - After the lease extension the Freeholder will no longer collect ground rent on the flat and needs to be compensated for this loss. All the ground rents over the course of the term are capitalised to bring it back to a present value figure. This may be very straightforward when the ground rent is £30 fixed through the term - alternatively, the ground rent could increase, say every 10 years, in accordance with RPI subject to the rent increasing on each assignment to 0.25% of the capital value !

    2. Reversion - At the end of the lease term the flat will, in theory, revert to the Freeholder. As the end of the lease gets closer the Freeholder’s reversionary interest becomes more valuable - (at the same time your interest in the flat starts to diminish).

      The value to the Freeholder of this element rises steeply as the lease term falls below 80 years. A statutory lease extension of an additional 90 years effectively delays the reversionary value of the Freeholder’s investment and the Freeholder must be compensated for this loss of value.

      The level of reversion is worked out using a yield known as a Deferment Rate, This rate has been set by Land’s Tribunal at the case commonly known as ‘Sportelli’. There are occasional exceptions to the yield set by this Land’s Tribunal and you should take advice from your valuer to see if the rate applies to your property.

    3. Marriage Value - The value of your flat reduces as your lease term reduces. Extending your lease increases the value bringing it back up to full market value. This increase in value is called ‘Marriage Value’. The Freeholder is entitled to a 50% share of any potential ‘profit’ made as a result of the extension.

    There are a number of factors affecting the valuation which will need to be assessed at the property, including the market value of the property, lessees improvements, layout changes etc. The terms of the lease will also affect the overall valuation. These factors vary from case to case and will be covered in your valuation report.

  • Why do I need to extend my lease?

    If you have a short lease which you may wish to sell, (or bequeath), in the future then extending is something of an unfortunate inevitability. You will need to extend to protect the capital value of your investment.

    The length of your lease will affect the saleability of your property for two reasons:

    1. Potential buyers will have difficulty in obtaining mortgage finance if the lease is not long enough; and
    2. The cost of extending the lease can deter your buyers

    Once a lease diminishes to around 65 – 60 years, the property may become un-mortgageable affecting the value, as only cash buyers will purchase.

    In practical terms this means that prudent buyers, under the advice of their solicitors, will expect any lease under 80 years to be extended before purchase (to avoid future costs).

    Note: Flat buyers rarely want to take on the inconvenience and cost of extending themselves, so as an owner it is better to extend yourself at the earliest opportunity. It is, nonetheless, possible to assign your right to a lease extension over to a new buyer and pass the costs on in exchange for a discount on the selling price. This method is not the best solution, but it can solve the issue of raising finance.