Under the Leasehold Reform, Housing and Urban Development Act 1993, leasehold tenants that have owned their property for at least two years have the legal right to extend the length of their lease by 90 years.
In some cases, a longer lease can add significant value to a property, as well as providing the obvious benefit of a leasehold tenant being able to control the property for longer. However, the lease extension process can be complex, stressful and expensive.
If you decide to extend your lease, it’s recommended that you seek professional guidance and representation. At South East Leasehold, our qualified solicitors and Chartered Surveyors have many years’ experience in leasehold negotiations and can help you obtain your extension for a fair price.
Extending a lease
A property lease is only valid for a certain length of time, and once it expires, control of the property reverts to the freeholder. To prevent this, there are two options available to the leaseholder; either they can make a formal agreement with the relevant freeholder to change the terms of the lease, or serve a section 42 notice, providing they are eligible, they can exercise their legal right to an additional 90 years on the lease, and reduce their ground rent to zero.
Is extending my lease worthwhile?
There are several factors which may impact your decision to extend your lease, including how much time is left on your current lease, your financial priorities, and how long you expect to own the property.
It gets considerably more expensive to extend a lease with less than 80 years remaining on the term, as you will be required to pay what is known as the “marriage value” of the property. This refers to half of the value the lease extension adds to your home, which is payable to the freeholder. For this reason, if you have 90 years or less on your lease, now is a good time to start thinking about an extension. You can use our Lease Extensions Calculator for approximate figures.
A longer lease is also more attractive to buyers, partly because they will have more time to settle in without worrying about extending the lease themselves, but also because an increasing number of mortgage lenders will decline a loan if the lease length is insufficient. If you are expecting to sell your home in the foreseeable future, extending your lease is likely to increase its value and attract more potential purchasers.
Are there reasons that I shouldn’t extend my lease?
Lease extensions typically cost several thousand pounds, and depending on your situation, may not always be worth the investment. For example, extending a lease with more than 90 years remaining on its term may not add a substantial amount of value to your home, even if you are intended to sell in the near future.
Even if you have less than 90 years remaining, you may find that another area of your home would yield a better return on investment, as long as you have more than 83 years left when it comes time to sell.
Some homeowners decide not to extend their lease because they intend to purchase the freehold; either making the extension much cheaper to obtain once they possess the freehold, or redundant entirely.