Tag Archives: Info for leaseholders

I want to extend my lease. Are there any additional costs payable other than the price of the lease extension?

If you want to extend your lease under the 1993 Act then the landlord’s reasonable legal and valuation costs will be payable by you (as well as your own).  You will not need to pay their costs in relation to any tribunal work, or in relation to any negotiation work carried out by the landlord’s surveyor or solicitor.

Often if you are agreeing a deal with the freeholder they will ask that their legal and valuation costs are paid on the basis that these would be paid under the statute.

Section 60 of the 1993 Act provides that the freeholder is able to recover the reasonable costs of checking the notice, serving counter notice and dealing with the conveyancing on the grant of the lease. The landlord’s reasonable costs of having a valuation report prepared to respond to the notice are also covered.

If you would like an approximate idea of the cost of extending your lease then there are some excellent calculators out there on the internet – such as this one:

http://www.bishopandsewell.co.uk/lease-extension-calculator/

These will only give an approximate idea, but if you are working out whether you can afford to extend your lease or not, or what the cost will be if you are buying then they can be very useful.

Link

The short answer is ‘No.’  It is not essential to use the 1993 Act to extend your lease.  It is possible to agree a lease extension by negotiation with the freeholder, however there are many factors to consider when looking at the Formal vs. Informal procedures.

Why should I extend my lease?

You should consider doing this if the lease is ‘short’, or approaching 80 years in length. Once the lease is under 80 years it will cost more to extend because a factor known as ‘marriage value’ will be added in the calculation.

Properties can be difficult to sell or re-mortgage where the leases are under 75 years and lenders normally like to see 50 years plus the mortgage term (typically 75 years).  In central London different considerations will apply where leases were originally shorter and capital values are higher. Nonetheless properties with extremely short leases will not be mortgagable.

If only cash buyers can buy a property it will reduce its open market value.  You should accordingly take steps to protect the value of the investment in your property before the costs become significant.  An alternative view is to see the asset as a wasting asset, producing an income that is rented out and to let the lease diminish to 0 years.  If this is done, then you may face a claim for terminal dilapidations (damages for wants of repair etc in the premises).  In such a case you should consider taking professional advice.

How long can I extend my lease for?

There is no set limit, if you’re negotiating informally.  Typically, the longest lease extension will be to 999 years on the basis that this is a ‘virtual freehold’ interest.  This would be possible only by agreement.  Often where flat owners have purchased the freehold the leases will be extended to 999 years and the ground rent reduced to ‘a peppercorn’.  This is to transfer all of the value out of the freehold and into the hands of the leaseholders who have participated in the freehold purchase.

If the lease is extended under statute, the maximum term of the extension is 90 years on top of the unexpired term.  In other words if your lease is currently 50 years the new lease will be 140 years long.  There is no option under the statute to agree a lesser or greater period of extension.  The statute imposes this ‘one size fits all’ solution.

By negotiation any lease length can be agreed by way of extension eg 99, 125, 150 and 250 years etc.