Lease extension explained

If you have owned/leased your flat for at least two years, you will probably qualify for a Statutory Lease Extension, which provides the opportunity to acquire a new 90 year lease extension, in addition to the existing unexpired term with the added bonus of the ground rent being reduced to nil. For example, an original lease of 99 years subject to a ground rent of £250 per annum, becomes a 189 year lease and no ground rent to pay.

Using your Statutory Lease Extension rights will secure your long-term residency, reduce your outgoings and add value to the property should you wish to sell in the future. It is sensible to obtain a lease extension at the earliest opportunity as the cost of extending the lease typically increases as the term remaining gets shorter.

Hanover would be delighted to answer your questions on leasehold extensions in person, although we have provided a quick guide below:


Q. What is ‘marriage value’ and how does it affect a lease extension?

The ‘marriage value’ is the difference between the value of a property with its existing lease and the value of the property with a short lease. In terms of lease length, 80 years is a marker to be noted by the leaseholder. If the lease term is below 80 years and the leaseholder wants to extend the lease, the marriage value has to be shared equally between the leaseholder and the freeholder. If the lease is extended with the term above 80 years, the leaseholder keeps the marriage value benefit to themselves.

Q. How do I obtain a lease extension for a house?

If you are extending the lease on a house, you also qualify to buy the freehold. Any freehold purchase would be negotiated with the freeholder via a solicitor and other property professional. If you are not in a position to purchase the freehold, the Statutory Lease Extension is also available for houses, although the lease can only be extended for a further 50 years. There is no marriage value attached to extending the lease on a house but expect an increase in ground rent.


 Q. Why do I need a survey for a lease extension?

The main purposes of a valuation survey is to arrive at a sum the leaseholder should pay the freeholder to extend the lease. A valuation will also determine any marriage value payable and help the freeholder assess any losses attached to granting a new leasehold agreement. A valuation survey should be conducted by a professional surveyor who specialises in lease extensions. It is the leaseholders’ responsibility to conduct and pay for this valuation.

Q. Should I instruct a solicitor?

Hanover highly recommends instructing a solicitor when undertaking a lease extension. They will:
Undertake checks to confirm you are entitled to a lease extension before you embark on a potentially expensive exercise.

  • Draft the Tenant’s Notice and serve it to your freeholder and any other parties to the lease.
  • Respond to a freeholder’s request for information in support of the claim.
  • Negotiate and agree the form of the new lease, costs and any other terms with the freeholder once a Counter-Notice has been received.
  • Make any applications to the Leasehold Valuation Tribunal should there be any delays or unreasonable Counter-Claims from the freeholder.
  • Complete the lease extension and register it with the Land Registry.


Q. How long does a lease extension take?

It is recommended to allow four to 18 months for extension negotiations to be fully concluded but Hanover advise that leaseholders should extend their lease when it reaches no lower than 82 years.


Lease extension: the steps to staying in your property

1. Contact the freeholder directly or through the managing agent.

2. Instruct a specialist lease extensions surveyor to prepare a valuation on your behalf. The value will determine how much you’ll pay for the lease extension and any payable marriage fees. A freeholder can apply to court to have the extension application struck off if it’s not reasonable and you’ll have to wait 12 months to reapply. So, sound advice and a professional survey is essential.

3. Instruct a solicitor to act on your behalf, who will use the value to apply for a lease extension directly to the landlord.

4. Once the notice has been submitted, a strict timetable comes into effect. The date of submission is considered to be the ‘valuation date’. Only the value of the lease extension on the valuation date will be considered as relevant to this application. Both the freeholder and leaseholder with have a set time frame to respond to further information requests, as well as make offers and counter-offers.

5. Once an offer has been accepted, your solicitor will negotiate and agree the form of the new lease, costs and any other terms with the freeholder.

6. Once terms are agreed, the lease extension can be completed and registered at the Land Registry.


Lease extension: points to remember

  • A freeholder can request a deposit of 10% of your offer or £250, whichever is greater.
  • The leaseholder is liable for their own and also the freeholder’s reasonable valuation and conveyancing costs (but not for any tribunal, hearing or negotiation costs).
  • A court can step in and act as the freeholder if no Counter Offer is received, although over 95% of extensions are concluded before this stage.
  • The Leasehold Valuation Tribunal can be instructed to produce a settlement figure, should the freeholder and the leaseholder fail to agree on a value.
  • You do have the right to appeal, should a mutually acceptable lease extension value not be agreed.