Lease Extensions: Thinking about extending the lease of your flat? Skip to content

15th April 2016

Thinking about extending the lease of your flat?


15th April 2016

Thinking about extending the lease of your flat?

If your flat is subject to a long lease with between 70 and 90 years left to run you should consider applying for an extension. Failure to do so may make the property more difficult to sell or mortgage. This blog explains the process of applying for an extension to your lease.

Why do I need to extend my lease?

When a landlord grants a lease it is for a fixed number of years. Once those years have completely elapsed the lease ends and the property reverts to the landlord.

This means that as the years start to expire and the term gets shorter, the lease gradually loses value and the cost of any extension inevitably gets more expensive.

A short lease can also be more difficult to sell as many buyers are hesitant to purchase a lease with less than 85/90 years left to run.

Also, mortgage companies are becoming more and more nervous about their lending habits and will often not lend on properties with less than 65 years remaining on the lease.

This means that where there is a property with a short lease the number of buyers available to purchase the property will be reduced.

If your lease has between 70 – 90 years left to run you need to consider undertaking a lease extension. Please be aware that the cost of extending your lease will be considerably more if the years left on the lease drop below 80 (please see below).

What can I do about this?

You can seek to extend your lease on a voluntary basis with your landlord. This will only be a consideration if your landlord is a willing landlord and so you will need to take a view on this from your own experience with your landlord and his/its attitude towards lease extensions.

If your landlord is willing then he may offer you a lower premium for the lease extension in return for a higher or increasing ground rent for the remainder of the extended term. You will need to think carefully as to whether this is a good deal and expert surveyors advice should always be taken as the increasing ground rent may have an impact on any future plans to purchase the freehold or extend the lease again.

However, if your landlord is unwilling there is a way to force him to grant you a lease extension. This is what we call a statutory lease extension.

How do I qualify for a statutory lease extension?

First of all you must have owned your flat on a long lease for at least 2 years. You do not however need to have lived at the property for the last 2 years. If the property was part of a shared ownership scheme you must now own 100{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48}.

Assuming that you satisfy this criteria, it is likely that you will qualify for a statutory lease extension.

What are the terms of the lease extension?

Assuming you qualify for a statutory lease extension then you will be entitled to a lease extension on the following terms:

  • A new lease with a term of 90 years in addition to the unexpired term of years on your existing lease (i.e. if you have 81 years left on your lease then the new lease will be for 171 years)
  • A peppercorn (i.e. nil) ground rent
  • All other terms of the new lease are to be identical to the existing lease save only for necessary modernisation.

Why is it more expensive to extend my lease after 80 years have expired?

If there is less than 80 years left on any long lease then an additional amount known as “marriage value” will become payable to the landlord making the cost of the extension more expensive.

Marriage value represents the enhanced value to a landlord of potentially being able to join the leasehold and freehold interests together on the expiry of the lease so as to make the property more valuable. Where marriage value applies, the flat owner will have to offer the landlord 50{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of the figure attributable to this enhanced value.

This is a valuation point. If you think that this applies to your lease, you will need to instruct an expert surveyor. We are able to recommend several expert surveyors who will be able to advise you.

What else do I need to think about?

In addition to your own legal and valuation costs you will also be liable for your landlord’s legal and valuation costs. However, this does not apply to all of the landlord’s costs. You are not liable to pay the landlord’s costs of negotiation of the premium nor any of his costs of appearing before the First-tier Tribunal (Property Chamber) (FTT).

The landlord’s costs must be reasonable and the FTT can rule that they are unreasonable.

If you decide to withdraw from the claim then you will be liable for the landlord’s costs incurred up to the date that you withdraw. Please note that if you withdraw from the claim you will not be able to serve another notice for a period of 12 months from the date of withdrawal.

How do I start the ball rolling?

The first thing you need to do is appoint a specialist leasehold enfranchisement solicitor who will be able to help you with the legal aspects, which can be complicated.

Next, you will need to obtain a valuation of how much it is likely to cost you to extend your lease. We have several specialist surveyors who are experts in lease extensions that we can recommend to you. Your surveyor will be able to provide you with a best case and a worst case scenario price for the lease extension to enable you to budget accordingly.

Once you have the valuation report we can serve what’s called an Initial Notice in the prescribed form on your landlord.

The landlord is then entitled to ask for a statutory deposit which represents 10{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of the proposed price stated in your Initial Notice. This is payable within 14 days of request and so it is vital that this amount is deposited with us prior to service of the Initial Notice.

What happens after I have served the Initial Notice?

The landlord will then have 2 months in which to obtain his own valuation and respond with a counter notice which will invariably require a higher price for the lease extension.

If the landlord fails to respond then he is deemed to accept your request for a lease extension on the terms as set out in your Initial Notice. Your solicitor will need to apply to court to compel the landlord to grant you a new lease.

Once the landlord has responded with a counter notice the parties then have a period of 2 months to agree the price payable for the lease extension. If the matter is not concluded then either party may apply to the FTT for a determination of the price to be paid.

The costs of taking the matter to the FTT are not recoverable from the losing party and it is likely that the matter will only be referred to the FTT in the event that the parties are very far apart in terms of the price payable.

There is a cut off date of 6 months from service of the landlord’s counter notice for the parties to agree the price and the terms of the new lease. If these have not been agreed, then your solicitor must make an application to the FTT otherwise the claim will be deemed to be withdrawn.

It is usually the surveyor who deals with the negotiations about the price payable as the arguments tend to relate to the valuation mechanisms under the legislation. There may also be arguments about the terms of the new lease, which will be dealt with by your solicitor.

Once matters are agreed, either by negotiations or through the FTT, a new lease is granted in place of the existing lease.

There is a further cut off date of 4 months from when terms are agreed and the transaction has not been completed, then your solicitor must make an application to the County Court to enforce the grant of the lease otherwise the claim will be deemed to be withdrawn.

What can I do if I am selling my flat?

If you have a short lease then your buyer may be willing to take over the benefit of the lease extension claim on the basis that you start the process and they effectively finish it off.

This has two benefits, the first is that you have a buyer when you have a short lease and the second is that they obtain a lease extension without having to wait 2 years to qualify under the Act.

Care must be taken to assign the benefit of the lease extension claim at the same time as the leasehold interest is assigned. If the two become separated then this will have the effect of making the claim deemed to be withdrawn.

If you are considering this option, it is vital that you speak to your solicitor as additional documentation will be required in order to protect the claim.

If you would like to talk to someone about extending the lease of your flat please contact myself or my colleague, Jennifer Sanders.


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