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How much does it cost to extend a leasehold?

Tim Heming
Written by  Tim Heming
Jonathan Leggett
Reviewed by  Jonathan Leggett
5 min read
Updated: 29 Apr 2024

The length of the lease, when to extend it and how much it will cost, are important considerations if you’re buying a leasehold property. Our guide helps explain the steps you should take.

What is a leasehold?

A leasehold is a form of property ownership where you hold the right to live in and use a property for a specified period – known as the lease term.

The leasehold system is common for flats, apartments, and some houses in the UK. It contrasts with freehold ownership, where the owner holds both the property and the land it sits on indefinitely.

Leasehold ownership grants the leaseholder the right to use the property according to the terms outlined in the lease agreement and typically includes paying ground rent and service charges.

block of flats

How long are leaseholds in the UK?

Leases on leasehold properties in the UK typically range from 99 to 125 years on purchase, but some leases can be much longer.

The length of the lease naturally decreases over time, reducing the property's value and marketability, but leaseholders usually have the legal right to extend their lease at a cost.

It’s typically advisable for leaseholders to take action if the lease period is approaching 80 years.

What is a lease extension?

A lease extension refers to the process by which a leaseholder increases the lease term of their leasehold property.

Typically, leasehold properties come with a specified lease term. As the lease term reduces, the property's value may decrease, and it can become harder to sell or mortgage the property.

Lease extension offers leaseholders the opportunity to extend their lease term, providing them with greater security and potentially increasing the property's value.

When should I extend my leasehold?

As a general rule, it's advisable to consider extending your leasehold before the remaining term drops below 80 years.

Extending before the 80-year mark can avoid paying ‘marriage value’, a potential additional cost incurred when the lease term falls below this threshold.

It's sensible to seek professional advice to assess the optimal timing and viability of extending your leasehold. Given the process can take several months, don’t leave it until the last minute.

How much does it cost to extend my leasehold?

The cost of extending your leasehold in the UK can vary depending on various factors, including:

  • The remaining lease term

  • The property's value

  • Ground rent

  • Any provisions in the lease agreement

Generally, the cost involves two main components: the premium paid to the freeholder for the lease extension and any associated fees, such as:

  • Legal advice from a solicitor

  • The lease extension valuation report from a surveyor

  • The freeholder’s reasonable legal and valuation costs (as a leaseholder you are likely to have to pay these)

  • Land Registry fees

Fees will differ depending on where you live and which solicitors and surveyors are used.

The premium itself is calculated based on a formula outlined in the Leasehold Reform, Housing and Urban Development Act 1993, taking into account factors like the property's value, ground rent, and the remaining lease term.

It's recommended to seek advice from legal and property professionals to get an accurate estimate of the cost specific to your situation.

It’s often considered a false economy to simply go for the cheapest services because leasehold extensions are specialist work and mishandled could end up costing you more in the long run.

Example of how much it might cost to extend a lease

Consider a flat with 85 years left on the lease that will be worth £300,000 once the lease is extended by an additional 90 years. Ground rent and service charges cost £300 a year.

The lease extension premium could be £7,000-£10,000, with additional fees including specialist surveyors (£600-£900) and solicitors (£600-£1,200) for both you and the freeholder.

Example total cost to extend the lease could be from £8,000 to £11,000*.

*Fees are only an estimate.

How long should I extend my lease for?

Deciding how long to extend the lease on your leasehold property depends on your future plans, financial considerations, and the terms of the existing lease. Generally, it's advisable to aim for a lease extension that provides long-term security and maximises the property's value.

A common approach is to extend the lease to the maximum term available. This might typically be 90 years for a flat and 50 years for a house, in addition to the remaining lease term.

This can help avoid the need for another extension in the foreseeable future and mitigate potential issues with selling or financing the property.

Individual circumstances may vary, and it's essential to consider factors such as your long-term residency plans, budget, and any specific requirements outlined in the lease extension legislation.

Seeking advice from legal and property professionals can help you make an informed decision tailored to your situation.

What is the process for extending my leasehold?

Leaseholders have the legal right to request a lease extension under the Leasehold Reform, Housing and Urban Development Act 1993.

The process involves negotiations with the freeholder, usually through legal representatives or surveyors, to agree on the terms and cost of the lease extension.

The extended lease typically adds 90 years to the remaining lease term, while also reducing or eliminating ground rent payments. There is a ban on ground rent for all new leases following the Leasehold Reform (Ground Rent) Act 2022.

If you can’t agree on a price you can make an application to the Leasehold Valuation Tribunal (LVT), which can make a ruling on what is a fair price for the lease extension.

The typical step-by-step process for extending your leasehold is as follows.

  1. Notify the freeholder. Inform the freeholder of your intention to extend the lease, indicating that you will pursue the statutory route.

  2. Engage a specialist solicitor. Select a lease extension solicitor who is a member of the Association of Lease Extension Practitioners (ALEP) and specialises in leasehold extension. Ask for quotes and compare costs to ensure reliable advice.

  3. Hire a valuation surveyor. Find a valuation surveyor proficient in leasehold extension legislation and knowledgeable about the local property market. Your solicitor can recommend trusted surveyors.

  4. Submit a formal offer. Serve tenants' notice, formally presenting your offer to the freeholder. Your solicitor will handle this aspect of the process.

  5. Negotiate terms. Work with your solicitor to negotiate a fair price for the lease extension, ensuring all aspects of the agreement align with your interests and legal requirements.

  6. Provide a deposit. If the landlord requests a deposit, pay the required amount within 14 days of the notice. Deposits typically amount to either £250 or 10% of the lease cost stated in the notice.

  7. Complete lease extension. When everything is contractually agreed, pay the leasehold extension premium and any fees owing to complete the process.

How long does the lease extension process take?

A lease extension process typically takes from three to 12 months, but it can be made quicker by efficient valuers, solicitors and other professional services.

Don’t leave it until the last minute if you’re thinking about extending the leasehold.

What happens if I don’t extend the leasehold term of my property?

If you don’t extend the leasehold term, the value of the leasehold property will diminish and it may also become harder to sell or mortgage the property.

If the lease term expires completely, ownership will revert to the freeholder and you will lose the property. However, action to extend the lease is usually taken years before this situation arises.

Is it worth extending a leasehold?

Consider the following factors before going ahead and extending a leasehold.

  • Remaining lease term. The shorter the lease term, the more urgent the need for extension, as property value tends to decrease as the lease approaches expiry, potentially affecting saleability and mortgageability.

  • Property value. Extending a leasehold can increase a property's value, making it more attractive to buyers and lenders. The cost of extension must be weighed against potential increases in value.

  • Lease extension costs. These include the lease extension premium, legal fees, valuation fees, and potential taxes. Calculate these costs against the potential benefits.

  • Ground rent and service charges. Extending the lease may involve renegotiating service charge terms and lowering or eliminating ground rent, which can impact the overall cost.

  • Marriage value. If the lease term falls below 80 years, an additional cost called marriage value may apply, potentially increasing the cost of extension.

  • Future plans. Consider your long-term plans for the property. If you intend to sell or pass it on to heirs, extending the lease may be beneficial for them.

Other useful guides

What are leasehold fees

Freehold vs leasehold

What is a tenants' association?

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