Lease Extension

Masters Residential Leasehold Law specialises in helping people exercise their legal right to extend their existing lease, paying a ‘peppercorn’ (£0) ground rent.

A lease that is too short can be difficult to sell. Extending the lease will protect the value of your flat and may be required by future buyers. The legal process is currently governed by a piece of legislation called the Leasehold Reform Housing and Urban Development Act 1993. It sets out the steps that must be followed, the qualifying criteria and the timetable the parties must follow.

What do I have to pay?

In addition to your own professional fees the flat owner has to pay:

• The lease extension premium
• The landlord’s reasonable legal and valuation costs
• Land Registry fees
• Stamp Duty Land Tax if the premium on your lease extension exceeds the current threshold

To get an idea of the lease extension premium try using the Leasehold Advisory Service’s online lease extension calculator:

https://www.lease-advice.org/calculator/

Your landlord’s legal fees are likely to be between £1,000 and £2,000 plus VAT depending on the complexity of your case.

Land Registry fees are typically £70 to £80 though they will increase if the premium on your lease extension is over £80k

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How many years can I add?

Flat owners currently have the right to add 90 years to the remaining term of their existing lease, though the government has announced that they plan to increase this to 990 years.

Do I qualify for a lease extension?

You must have been registered owner of your flat at the Land Registry for at least 2 years in order to qualify for the right to force your landlord to extend your lease. Until then your landlord can simply refuse to extend your lease, or offer you a lease extension on unreasonable terms.

How long does it take?

The legal process typically takes between 6 and 9 months to complete, though if terms are agreed quickly it can take less time or if terms are disputed it can take longer.

How is the claim started?

The legal process is started by serving a claim notice on your landlord. The notice must comply with s.42 of the Leasehold Reform Housing and Urban Development Act 1993, and is therefore often called a ‘section 42 notice’ .

The claim notice must let the landlord know how much you are proposing to pay for the lease extension and whether you want any of the terms of your lease to be varied. We can help you to draft and serve the lease extension claim notice. 

When do I have to pay?

The premium and landlord’s costs are payable at the end of the lease extension process, though the landlord is entitled to a demand a deposit of 10% of the premium you propose near the outset.

We usually invoice twice during the process: the first after your lease extension claim notice has been served and the second when your lease extension completes.

Do I need a professional valuation?

As the law currently stands, in most cases we highly recommend you obtain valuation advice from a chartered surveyor or valuer with a specialism in this field. A lease extension valuation is primarily concerned with the impact granting the long lease has on the value of the landlord’s interest in the flat and so determining the value of your flat is only part of the valuation process. We can recommend a valuer if you require.

Your valuer will conduct negotiations over the premium with the landlord’s valuer. In the unlikely event the premium cannot be agreed, your valuer will represent you at a Tribunal that can determine the premium.

However, the government has announced it intends to create a lease extension calculator to simplify the valuation process, which may remove the need for a valuation.

What is ‘marriage value’?

When the leasehold reform legislation was first introduced the government decided it was fair for any increase in the value that is created by a lease extension to be split between the landlord and flat owner. They set the point at which this happens at 80 years, so if your lease has less than 80 years left to run and you make a formal claim to extend it, you will have to pay this additional value as part of the premium.

Technically marriage value is 50% of the increase in the combined value of the flat owner’s and landlord’s interests in the flat after the lease extension as opposed to the combined value before it. When the lease is extended the value of the flat owner’s interest increases and the value of the landlord’s interest decreases, but what tends to happen is that their combined values after the lease extension are greater than they were before it, so additional ‘marriage value’ is created.

The government has announced that it plans to remove the obligation to pay marriage value and so in future flats with fewer than 80 years left to run may not need to pay this additional value as part of their lease extension.

Further information

Extensive information about the right to extend your lease can be found on the Leasehold Advisory Service website.