call-to-action call-to-action-mobile

What is a leasehold property and how do I extend a lease?

Mon 20 Jan 2020

What is a leasehold property and how do I extend a lease?

Lots of people in England and Wales own a leasehold property, so we’ve compiled bite-sized answers to some frequently asked questions.

We’ll get to those further down in this blog article, but the first thing to note is that flats are commonly owned on a ‘long lease’ basis.

A lease is usually granted for anywhere between 99 and 999 years, with owners of long leases having certain rights, including around the extension of a lease.

Read on as the Rightmove team walks you through the basics about leasehold properties.

Can my lease expire?

Yes, like any tenancy, leasehold has a start and finish. Make sure you know how long is left before you buy, because as it gets shorter, it becomes more difficult to sell. If your lease expires, you have certain rights if you live in the property. But if you carry on living there you’re likely to have to pay a market rent. Therefore, it’s advisable to extend the lease well before it runs out.

What does ‘short lease’ mean and what can I do about it?

If you’re selling your flat and your estate agents tells you that you have a ‘short lease’, this means that the remaining length of your lease has reached a point where it may be a concern for a buyer’s mortgage lender. But the good news is that leases can be extended to overcome the short lease problem. You’ll need to contact your landlord to ask for an extension and this can be done formally or informally.

What is the formal method to get my lease extended?

You will have a right to extend the lease of a flat after two years of ownership, but you will have to pay the freeholder for this and the cost can be quite hefty, depending on the length left on the lease. The formal way of doing things means using the rights granted under the Leasehold Reform Housing and Urban Development Act 1993. Like we said before, subject to owning the flat for two years, you can force your landlord to extend the lease.

How do I formally get my lease extended?

Under the Leasehold Reform Housing and Urban Development Act 1993, you start by sending a legal notice to your landlord, called the ‘initial notice’. The law requires that certain information is included, crucially, the price you propose to pay to extend the lease. The initial notice also gives your landlord no less than two months to serve a ‘counter-notice’.

Your landlord’s counter-notice is likely to set out their preferred price, but if this is higher than you wish to pay, you’ve got two months to negotiate a deal. However, if the terms of the sale (including the price) can’t be agreed within that period, the First-tier Tribunal (Property Chamber), in England, and the Leasehold Valuation Tribunal, in Wales, can decide the price. Once the terms of the lease extension (including the price) have been agreed or decided by the tribunal, you and your landlord can then move to complete the lease extension.

If you’re pursuing the tribunal path, it’s advisable to get a knowledgeable solicitor to assist you. But before any work is done, you should ensure that you receive clear estimates of the likely professional fees. This is especially the case because you will also have to pay your landlord’s ‘reasonable’ costs.

What do I get if I extend my lease using the formal process?

You’re entitled to an extra 90 years on top of what is remaining and the ground rent on your new lease becomes a peppercorn (nil) rent. So, if 75 years are left to go, a new lease of 165 years (90 plus 75) can be granted in substitution for the existing lease, with no rent to pay throughout the 165 years.

What is the informal process to get my lease extended?

The informal method is essentially a negotiation with your landlord, but proceed with caution as this route takes place outside of the formal rights to extend under the law. Essentially, it’s a negotiation and landlords sometimes put forward excessive terms. As such, make sure you have the price and terms of the extended lease checked by a knowledgeable solicitor and valuer to ensure that the deal is a good one. But again, before any work is undertaken, you should ensure that you receive clear estimates of the likely professional fees.

 How is the price determined for a lease extension?

This is a very technical calculation, and so you should ask a specialist valuer to provide you with their view on the price of the lease extension. The price to be paid boils down to determining the following values:

  1. ‘The Term’: the value of ground rent over the remaining years of the lease;
  2. ‘The Reversion’: the value for your landlord of getting the property back at the end of the lease; and
  3. ‘Marriage Value: this is payable where there are 80 years or less left on the lease. It’s basically the increase in the value of the flat arising from the new lease. The law says it is to be shared equally between you and your landlord.

Is anything being done to make extending a lease easier?

The Law Commission has published a report setting out options for reducing prices to extend a lease and for simplifying the way in which the price is calculated.

Where can I get more advice on lease extensions ?

Contact the Leasehold Advisory Service (LEASE), who helped us compile this information. LEASE is a publicly funded service giving free advice online, by telephone, in writing and face-to-face.

Visit https://www.lease-advice.org/ for more details or check out our Advice Hub: https://www.rightmove.co.uk/advice/

For original article please visit: https://www.rightmove.co.uk/news/articles/property-news/what-is-a-leasehold-property-and-how-do-i-extend-a-lease/

"Anker and Partners are the best Estate Agents we have dealt with after the hunt for the house of our dreams! The Staff are friendly and helpful, being supportive to the completion of purchase. We have had 'experiences with other Estate Agents that I won't name here, were nothing but ruthless...Anker completely restored our confidence!! thank you sooo much!"
Simon Dyer - Purchaser

News Archive

January 2020

What is a leasehold property and how do I extend a lease?

November 2019

Charity Santa 5km Fun Run

September 2019

A Guide to Shared Ownership

May 2019

9 Top Tips for Selling Your House (AND 3 MISTAKES YOU SHOULD AVOID)

June 2019

How to prepare your garden before selling your home

April 2019

6 Top Tips to Help First Time Buyers Get on The Property Ladder

A Guide to Downsizing (or 'Right-Sizing')

A guide to getting your home ready for viewings

January 2019

How to use Rightmove tools

December 2018

Christmas Opening Hours 2018

November 2018

Help to Buy ISA. Everything you need to know

September 2018

Five tips to help you feel at home in a new property

August 2018

Prioritise your search with Keyword Sort

June 2018

GrangeFest 2018

Why you should check your credit score before searching for a new home

April 2018

Overseas Homes

March 2018

Property viewings: 9 tips for finding 'the one'

Conveyancing: Advice For Homebuyers

February 2018

Seven top tips for today’s first time buyers

December 2017

Happy New Year!

Merry Christmas!

Christmas Opening Hours 2017

Unwrap your perfect home this Christmas

November 2017

Stamp duty scrapped on homes up to £300,000 for first time buyers

Top tips for dealing with the Bank of England’s 0.25% base interest rate rise

February 2018

Top tips for reducing condensation

July 2017

Broughton Castle Sportive 2017

Bodfest 2017

May 2017

The London & Country Property Show 2017 - Update

April 2017

The London & Country Property Show 2017

March 2017

On The Markets guide to house price indices

Plans for a £50 million waterfront leisure development in the heart of Banbury have be unveiled.

February 2017

Is your home in an area prone to flooding? What to do if disaster strikes?

January 2017

House prices: Whats in store for 2017?

December 2016

Merry Christmas and Happy New Year

Christmas Opening Hours

November 2016

Hugh Grants Former Bachelor Pad For Sale

Tories pledge to build 40,000 more affordable homes in Autumn Statement 2016

Winter-Proof Your Home SOS

October 2016

Spamalot - Banbury Operatic Society - Tickets on Sale

Keeping your home damp free

What The Bank Of England Base Rate Cut Means For Mortgage Holders

September 2016

Moving to a new area? Top tips to help ease moving house

August 2016

Buying or selling a property with asbestos?

July 2016

3 Ways RICS Home Surveys Pay For Themselves

June 2016

Buying or renting a listed building? Everything you need to know

10 Secrets To Achieving Show Home Style

May 2016

Buying Or Selling A Property Affected By Japanese Knotweed?

Can Overpaying Your Mortgage Save You Money?

All You Need To Know About The Lifetime ISA

5 Ways To Protect Your Home From Flooding

April 2016

One in four of today’s first-time buyers will be paying off mortgages in retirement

Anker and Partners sponsored football kit being re-used in Sierra Leone!

February 2016

Sky Dive to Raise Funds for the Blue Cross

Is it cheaper to rent or buy a home?

January 2016

Will UK house prices continue to rise in 2016?

Supporting Dogs for Good

UK Stamp Duty - What changes to expect in 2016?