A lease extension is a critical aspect of property ownership for leasehold properties. Whether you’re a homeowner, landlord, or tenant, securing an extended lease can safeguard your investment and increase the value of your property. This guide explores the key elements of lease extensions, their benefits, and how to navigate the process effectively.  

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What is a Lease Extension?  

Leasehold properties are common in the UK, particularly for flats and apartments. Unlike freehold ownership, leasehold grants you the right to use the property for a set term, typically 99 or 125 years. As this term diminishes, particularly when it falls below 80 years, the property’s market value can decrease, and obtaining a mortgage becomes more challenging.  

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A lease extension involves increasing the length of the lease term, often by 90 years, while reducing ground rent to zero. This process ensures your property remains a valuable asset and avoids additional costs, such as the "marriage value" premium, which applies when extending a lease below 80 years.

Benefits of Extending a Lease  

1. Increase Property Value: A longer lease makes your property more attractive to buyers and lenders.  
2. Avoid Marriage Value Costs: Extending before the lease drops below 80 years can save thousands in additional premiums.  
3. Secure Long-Term Ownership: An extended lease provides stability and peace of mind.  
4. Reduce Ground Rent: Statutory lease extensions eliminate ground rent, reducing future financial liabilities.  They can therefore be a useful tool against doubling or RPI ground rents.

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Types of Lease Extensions  

There are two primary ways to extend your lease:  

​​1. Statutory Lease Extension
Under the Leasehold Reform, Housing, and Urban Development Act 1993, qualifying leaseholders have the legal right to a statutory lease extension. This process includes:  
- Adding 90 years to the existing lease.  
- Reducing ground rent (including any problematic doubling ground rent) to a peppercorn (effectively zero).  

To qualify, you must have owned the property for at least two years, and the lease must originally have been for a term of over 21 years.  

Advantages of Statutory Lease Extension:  
- Clear legal framework with defined timelines (avoiding freeholder delay tactics)
- Protection against unreasonable terms or delays from the freeholder. 

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2. Voluntary Lease Extension

A voluntary lease extension involves negotiating directly with the freeholder outside the statutory framework. While this can sometimes be quicker, it often comes with less favourable terms, such as higher premiums, continued ground rent, or additional clauses.  

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It is unfortunately common for unreasonable demands to be raised late in the day, and after a costs undertaking has been given. This is therefore a riskier route though it is often presented as an easier route by freeholders, backed by a time limit for the leaseholder to proceed.

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Key Considerations for Voluntary Extensions 
- Always review the terms carefully to avoid hidden costs.  
- Seek expert legal advice to ensure fairness.  

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Costs Involved in a Lease Extension  

The cost of a lease extension depends on several factors, including:  
- Premium: The payment to the freeholder for extending the lease, for which you can use a lease extension calculator like this one.  
- Valuation Fees: To determine the premium.  
- Legal Fees: For both the leaseholder and the freeholder.  
- Tribunal Costs: If disputes arise, you may need to apply to the First-tier Tribunal. Though it is rare for a full First-trier Tribunal Hearing to happen.

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We go into more detail on typical lease extension costs in this explainer.

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The premium calculation includes factors like the property’s current value, the remaining lease term, the ground rent and how this increases (such as doubling ground rents or RPI ground rents) and the potential marriage value. It’s essential to hire a qualified surveyor to ensure accurate valuation.  However you can start with a ball park figure using this online calculator, such as this one here.

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Steps to Extend Your Lease  

1. Check Eligibility: Ensure you qualify for a statutory lease extension.  
2. Appoint Professionals: Hire a solicitor and surveyor experienced in lease extensions.  ideally before negotiating with your freeholder (who is under no obligation to be fair  or transparent)
3. Serve Notice: For statutory extensions, serve a Section 42 notice on the freeholder, outlining your intent and proposed terms.  
4. Negotiate Terms: The freeholder has two months to respond. Negotiations may follow to agree on the premium and terms.  
5. Complete the Process: Finalise the lease extension through legal documentation and registration at the Land Registry .  

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Common Challenges in Lease Extensions  

- Disputes Over Premiums: Freeholders may demand higher premiums. An independent surveyor appointed for the leaseholder can ensure the correct premium is paid. Note that the freeholder will almost certainly appoint an experienced valuer.
- Freeholder Delays: Statutory timelines protect against unnecessary delays, but voluntary extensions may lack this safeguard.  
- Complex Legal Terms: Working with a solicitor ensures all terms are clear and fair.

- Unauthorised alterations: freeholders valuers will sometimes try to find an issue where non exists to gain leverage in negotiations. Advise your solicitor in advance if any work has been carried out to the flat without the freeholders expressed consent. 

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Why Act Early on Lease Extensions?  

Acting early to secure an extended lease can save significant time and money. As the lease term diminishes, the cost of extension rises, and the process becomes more complex.  

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Why Choose Expert Legal Support?  

Lease extensions are legally and financially intricate, requiring expert guidance to navigate effectively. An experienced solicitor can:  
- Handle complex negotiations with the freeholder.  
- Ensure compliance with statutory requirements.  
- Protect your rights and avoid costly mistakes.  

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Note that this is a different legal discipline to conveyancing, and care must be taken to ensure you are properly advised. Mistakes can be extremely expensive to remedy.

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Lease Extensions and Leasehold Reform  

The UK government intends to introduce various reforms to simplify the leasehold system and make it fairer for leaseholders. This is however a very slow process with many leaseholders waiting for the changes to be enacted by Parliament.

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The Leasehold and Freehold Reform Act 2024 was something of a non-event, as secondary legislation is required to bring in the important changes, such as abolishing marriage value and creating a Government backed lease extension calculator to remove the costly negotiation process.

Proposed changes include capping ground rent when calculating lease extension premiums, removing some freeholders recoverable legal costs, and allowing leaseholders to extend their lease to 990 years. Staying informed about these reforms is crucial for making the best decisions regarding your property.  

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Conclusion  

A lease extension is an essential step for maintaining and enhancing the value of your leasehold property. Whether through a statutory or voluntary route, understanding the process, costs, and benefits is key to a successful outcome.  

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We have guidance notes on other leasehold matters, including the Right to Manage, buying the freehold, section 5 notices and more. Ricky Coleman is a leasehold solicitor based in Brighton, advising on all aspects of lease extensions  for properties in Sussex, London and beyond.