When you buy a leasehold home, the land the property sits on will be owned by the freeholder and you will lease it for a set amount of time. A lease extension is the process of adding years onto a lease. A leasehold extension solicitor will be able to assist you with this process.
As the number of years on the lease decreases, the home’s value can be impacted. This can make it difficult to remortgage and later sell. As a result, it’s important to be aware of the years left on your lease and when you should extend.
As extending a lease can be a long and complex process, it is vital that you hire an accredited solicitor. They can advise you on your lease extension, explain any jargon and ensure the process is completed efficiently.
Do I Need a Solicitor To Extend My Lease?
When extending the lease on your home, it is strongly advised that you consult a solicitor. This is especially the case if there is less than 80 years left of the lease as the process can become more complex. The freeholder will also have their own solicitor during the negotiations.
You can start negotiations with the freeholder informally. However, you should hire an experienced solicitor to assist you if the negotiations fail.
What Will a Leasehold Solicitor Do?
A leasehold solicitor will be able to advise you on your lease extension. They will serve your Section 42 notice on the freeholder.
A Section 42 notice is a formal notice that a tenant issues to a landlord. This initiates the formal statutory lease extension. The statutory lease extension cost can vary. This is issued if the tenant and landlord cannot agree the premium informally or if the landlord has not responded to the tenant.
The freeholder has 2 months to prepare and send a Section 45 notice. Your solicitor will then receive a notification when the freeholder’s solicitor serves the Section 45 notice in response.
Your solicitor will read the new lease to check everything is correct. They will then file it with the Land Registry.
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How Much Do Solicitors Charge to Extend a Lease?
The typical solicitor fee for extending a leasehold is £600-£1,200. The cost will vary depending on a number of factors. These include:
Value of the property
Length of the lease
Years left on the lease (if there’s less than 80 years the cost can increase significantly)
Annual ground rent payable
Value of improvements made to the home
How much the property will be worth after the lease extension
What Other Costs Apply?
In addition to the fee you pay your solicitor, you will also need to factor in a number of other costs associated with extending a lease.
Premium to the Freeholder
The most significant cost is the premium you agree with the freeholder, which could cost upwards of £5,000. The premium will depend on the negotiation with the freeholder. It will also be determined by the location and value of the property, lease length and ground rent payable.
Surveyor’s Fee
There is also the cost of a surveyor to consider. You will need to hire a surveyor to calculate your opening offer to the freeholder. This will then be negotiated between the surveyor and the freeholder. The valuation will cost in the region of £600-£900, with negotiation costs averaging £150-£200 an hour.
You will also need to consider, Land Registry fees, the Freeholder’s legal fees and the Freeholder’s valuation
Once your solicitor serves a Section 42 notice to the freeholder, under lease extension law, you will be responsible for their legal fees. This may include a valuation.
Below we’ve included a table of the typical costs expected when extending a lease:
| Service | Cost |
|---|---|
Lease extension premium | Upwards of £5,000 |
Your surveyor’s valuation | £600 - £900 |
Surveyor’s negotiation costs | £150 - £200 an hour |
Your solicitor’s fees | £600 - £1,200 |
The freeholder’s valuation | £600 - £900 |
The freeholder’s solicitor costs | £600 - £1,200 |
Land Registry fees | £20 - £40 |
For full details on the fees associated with Lease Extension see our article: How Much Does Extending a Lease Cost in 2022?
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Why Is It Important To Extend My Lease?
Extending the lease on a leasehold property will increase its value. It will also make it easier to sell when you decide to move. It will also make it easier to remortgage.
Either you or any future owner will struggle to get a mortgage on the home if there are less than 70 years left on the lease. As a result, this could put off potential buyers when you sell.
Another reason to extend is once the remaining time on the lease drops below 80 years it becomes more expensive to extend the lease. The longer you leave it, the more it is likely to cost you. You will also need to extend your lease if you buy the freehold.
For more information read Lease Extension Valuation
Lease Extension Process
The lease extension process typically takes around 3 to 12 months.
The process includes:
The first step is to hire a specialist surveyor to provide a valuation. They will look at the current length of the lease, the property location, the terms of the lease and ground rent. They will also calculate the home's value with and without the lease extension.
You can start negotiations informally with the freeholder. If this is not successful, your solicitor will serve a Section 42 “Tenant’s Notice” on the freeholder.
The freeholder has 2 months to respond with a Section 45 counter notice.
Once a premium price is agreed upon with the freeholder, your solicitor will complete the paperwork required and draw up a new lease.
The lease is then signed by both parties. The new lease will be registered with the Land Registry by your solicitor.
When Should I Extend?
It is recommended that you extend the lease of the property before it reaches 80 years or less left on the lease. If 80 years are left, a new lease of 170 years (90 plus the existing 80) can be granted. As we’ve mentioned above, the longer it is left, the more expensive and complex the proces will be.
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