Do I Need A Solicitor For A Lease Extension?

Nikka Sulton

Do I Need A Solicitor For A Lease Extension?

Considering a lease extension? Wondering if legal assistance is necessary? Read into our guide to find out if you need a solicitor’s expertise for navigating the complexities of extending your lease.

What is a lease extension?

Leaseholders of residential properties have the legal right to extend their lease terms. When you buy a leasehold property, you’re essentially purchasing it for a fixed period specified in the lease, known as the “Term.” As this Term nears expiration, the property’s value diminishes.

With around 4.5 million leasehold homes in England, lease extensions are common, especially for flats. The Leasehold Reform Housing and Urban Development Act 1993 grants leaseholders the legal entitlement to extend their leases, particularly crucial when the lease term falls below 80 years.

If the lease on your flat is getting short – under 80 years is the key age of a lease – don’t worry. You have a legal right to extend it under the Leasehold Reform Housing and Urban Development Act 1993.

Why do I need to extend my lease?

When a lease dwindles to around 90 years, mortgage lenders grow apprehensive, complicating both selling and mortgaging processes for flats. Extending the lease becomes imperative at this point to alleviate such concerns.

Who is able to extend a lease?

If you’ve held ownership of your flat for a minimum of two years, you’re legally entitled to extend the lease. Governed by the Leasehold Reform, Housing, and Urban Development Act 1993, this Act empowers leaseholders to elongate their lease term by 90 years and reduce ground rent to £nil, provided the prescribed procedure is adhered to – effectively barring any rejection from the freeholder.

For those who haven’t owned the flat for two years yet, informal discussions with the landlord regarding an extension are an option. However, utilization of the statutory procedure awaits the completion of the two-year ownership mark.

Leasehold houses are subject to different regulations. Refer to “What if I own a leasehold house?” below for further information.

How much does it cost to extend a lease?

Extending a lease entails a structured calculation process, factoring in various elements such as property value, remaining lease years, annual ground rent, and potential enhancements by leaseholders. While intricate, this computation is typically handled by a surveyor. For a rough estimate, utilize our free calculator tool.

Initiating the lease extension journey involves obtaining a valuation to determine the probable premium. Even if opting for a voluntary extension, seeking valuation counsel is advisable to ensure the offered premium from the freeholder is equitable.

Engage a proficient valuer with expertise in enfranchisement matters for sound guidance. It’s crucial to emphasize that any offer made under the 1993 Act must be bona fide – genuine and fair. An experienced valuer can provide insights on determining an appropriate offer.

What other costs are payable relating to extending a lease?

Apart from the lease extension price, you also have to pay:

Your Legal fees
Your Surveyor’s fees
The freeholder’s reasonable legal and surveyor’s fees
Stamp duty*
Land Registry fees

*While stamp duty land tax applies to lease extensions, it’s unlikely that you’ll pay it. That’s because the rate is 0% on the first £125,000 of the lease extension premium. The majority of lease extensions come in well below this level of premium.

If you own more than one property and you are paying Stamp Duty on your lease extension you will be liable to pay the additional rates.

When should I extend my lease?

Extending your lease is best considered when it has about 90 years remaining. Anything under 100 years is usually flagged as short. But the critical mark is 80 years. Once it falls below 80, even by a day, the cost of extension rises significantly due to “marriage value,” the added property value post-extension. This can lead to substantial additional costs, sometimes amounting to tens of thousands of pounds.

What are the steps for extending my lease?

Deciding whether to extend your lease voluntarily or under the 1993 Act depends on your circumstances and your freeholder’s stance. However, most leaseholders opt for the statutory process because it sets clear deadlines, preventing delays from the freeholder.

Seek legal advice and appoint a solicitor.
Engage a surveyor experienced in lease extensions to value the extension and determine the price.
Serve an official notice outlining the price and new terms. Your solicitor will handle this, but you’ll need to sign.
Pay any requested deposit within 14 days.
The landlord responds with a counter offer in a counter-notice.
Negotiate the price, typically through surveyors.
Once the premium is agreed, the landlord’s solicitor drafts the lease extension terms, reviewed and negotiated by your solicitor.
Complete the process and register the extension with the Land Registry, managed by your solicitor.

If agreement on the price or lease terms isn’t reached within 6 months, you can seek resolution through the Property Tribunal, though few cases end up there. This step often prompts the freeholder to engage in negotiations.

Under the Leasehold Reform, Housing and Urban Development Act of 1993, leaseholders can extend their lease by 90 years after owning the property for 2 years. However, buyers may utilize the seller’s ownership period to expedite the process.

In a voluntary lease extension, the freeholder typically sets the process. You may need to cover the costs of their valuation, and once terms are agreed, a lease extension deed is drafted, negotiated, and completed, with solicitors handling registration. If there’s a mortgage, lender consent is required.

For a statutory lease extension, start by serving a section 42 notice on the freeholder, offering a premium for the extended term. The freeholder has 2 months to respond with a counter-notice, admitting or denying your right and proposing terms. Negotiations follow, with a 6-month window before resorting to a property tribunal if needed, concluding with lease completion and registration.

How long will it take to extend my lease?

Typically, the statutory process spans 6 to 12 months from start to finish. Opting for a reputable solicitor, preferably a member of the Association of Lease Enfranchisement Practitioners, can significantly accelerate the proceedings.

Do I need a solicitor to extend my lease?

Yes, it’s essential. Even if you pursue an informal agreement directly with the freeholder, it’s crucial to have a solicitor review the lease to ensure fair terms and no unexpected additions. Additionally, if your property is mortgaged, legal representation is necessary. Without professional guidance, you risk overpaying for the extension or facing complications that could render your property unsellable.