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Extending the lease on my leasehold flat
- AuthorJenny Colvin
When you buy residential leasehold property, such as a flat, you buy a term of years which has a finite, known end date. Whilst this term is unlikely to expire in your lifetime, mortgage lenders have recently become more and more unwilling to loan money where it is secured on a leasehold flat with less than 85 years left on the lease. This figure has increased over recent years, therefore the original 125 year term is unlikely to be sufficient for very long. You will therefore need to extend your lease if you have less than 85 years left on the term should you wish to sell or re-mortgage the property. Jenny Colvin, Partner and lease extension specialist, explains here what the process is of extending the lease on your leasehold property, and how we can assist you in protecting your property for the future.
The Housing Act 1988 gives leaseholders the statutory right to extend their lease, and there are various ways to do this. Please note that you will be charged a premium for the extension by your landlord. You will also be expected to pay their legal costs plus their valuation fees.
How do I extend the lease on my leasehold flat?
There are two different routes to extend the lease on your property; either the statutory route or the voluntary route. The route you choose will be dependent on your own personal situation and whether the landlord/freeholder is in agreement with extending the lease.
You will therefore need to contact your immediate landlord in the first instance, likely (but not always) the freeholder of the building, or their management company, to see what their requirements will be. If you live in a larger block, you are unlikely to be the first person to go through the extension process and therefore they should have practices in place to assist with the first step.
What is the process of extending the lease?
This route is only available to you once you have owned the property for two full years and would result in you being entitled to a 90 year extension, plus the remaining term of your lease. Whilst this can sometimes take months to complete, the ground rent would be reduced to a peppercorn (a nominal amount meaning you no longer pay a ground rent) and all other terms would remain the same as in the existing lease.
The landlord will ask you to pay their legal fees and those of their surveyor, in addition to the premium they charge for extending the lease. This premium would be assessed by a surveyor, and is a greater amount the shorter the lease becomes.
This route is useful where you cannot obtain contact with your landlord, if they are not responding to your request or are just being unreasonable.
The voluntary route, in contrast, can be used when the landlord voluntarily agrees to grant a lease extension. As with the statutory route, you will likely be asked to pay the surveyor’s fees, along with their legal costs, plus the premium chargeable.
The main difference is that while this route can be quicker, you will not necessarily receive the same outcome regarding the terms of the new lease. The new lease may be for 99 years or 125 years from the date of the extension, and so you may be left with a shorter lease compared to the statutory route, depending on the number of years remaining on the lease.
The other conditions within the lease are also negotiable at this stage, such as the ground rent and anything else that may not be accurate or of concern to you.
How much does it cost to extend the lease?
As mentioned above, there are several costs that you will need to consider when extending your lease, and the different routes will attract different costs. It is not a cheap process and the less time left on your lease, the higher the premium will be.
The general costs that you would need to consider include:
- Drafting and serving the statutory notice (should you choose the statutory route)
- Review, approving and negotiating on the draft lease extension document
- Third party payments, such as:
- Title documentation
- Land Registry search fees
- Stamp Duty Land Tax
- Premium for the extension
- Landlord and surveyor’s legal costs
You can also seek additional information regarding the likely cost of your premium by using the Lease Advice calculator. We would advise that you seek a formal valuation in addition to using this calculator, and can recommend appropriate surveyors to conduct this for you.
What is the first step once I have decided to extend the lease?
Once you have decided that you wish to extend the lease on your property, we recommend contacting your landlord to ascertain their position on this. You may also wish to contact a valuation surveyor to see what the likely premium will be. Once you have figures and the terms of the extension agreed, we can assist in agreeing the legal documentation to support this.
If your landlord is not giving you the response you need, please get in touch and we can advise on and initiate the statutory process to ensure that they do so.
We are happy to give you some guidance before the terms are agreed, or on any proposed terms by your landlord, and can then liaise with their lawyers to agree the appropriate documentation. To have your questions answered about extending your lease, you can contact Jenny or a member of the team by calling 023 9277 6558 or emailing firstname.lastname@example.org.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. We accept no liability for the content of this material. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.