How to extend your lease

As a leaseholder, you have 2 routes to follow if you wish to extend the number of years on your lease: formal and informal. The formal lease extension process is more strict, following a series of procedures and notices that you have to serve to your freeholder. It also has limitations in terms of how much you can extend the lease.

The informal lease extension process is easier and offers more flexibility, as you just agree informally with your landlord, but this also means it is riskier in terms of legal protections.

Difference between a formal and informal lease agreement

• Formal Lease Extension follows the statutory route adding an additional 90 years onto your current lease term, reducing ground rent to zero (known as a Peppercorn Ground Rent), premium calculated within and the process timeline governed by statutory parameters.
• Informal Lease Extension doesn't follow the statutory route, can agree any length of lease term (up to 999 years), new clauses and ground rent only reduces to zero after the original term expires, premium can be for any value and isn't governed by a set timeline (if you own a shared ownership property you can only use the informal route until you staircase to 100%).

This article follows the Informal Lease Extension Process and explains the Pros and Cons of following this route.

What are the Pros and Cons of the Informal Route?

What is the Informal Lease Extension Process?

This is the Informal Lease Extension Process from start to finish:

• 1Freeholder of Leaseholder makes an offer
• 2Instruct your RICS Surveyor
• 3Instruct your solicitor

• 1

  Freehold or Leaseholder make an offer

Freeholder provides an informal offer

It is common for Freeholders to make an informal offer to extend your lease. The formal wording of an offer would be similar to the following:

"I can confirm that the Freeholder has carried out a Valuation as requested to extend your lease to 99 years for the sum of £15,000..."

The fact a Freeholder has made you an informal offer doesn't mean you have to accept it; you may feel that the premium is too high for the number of years offered (see 'Instruct your RICS surveyor' below) or you may feel that you'll get more value for money by extending using the formal lease extension route.

Leaseholder provides an informal offer

As a leaseholder, you can make an informal offer (i.e. what premium you're offering to pay for extending your lease alongside how many years you want to extend it by) to your freeholder. To do this you need to either:

• Speak to your managing agent and make your informal offer to them - some managing agents only accept the formal route to extend a lease; or
• Liaise directly with your freeholder. You can find your freeholder's address on the ground rent receipts provided annually or on the title deeds downloadable for £3 from the Land Registry.

• 2

  Instruct your RICS surveyor

There are many online lease extension calculators that can give you a general indication of what you might reasonably expect to pay for your lease extension, however you should instruct a RICS-qualified lease extension valuer to accurately confirm how much you should offer or to confirm if your freeholder's offer is accurate.

As the informal route is an informal negotiation between a freeholder and leaseholder, your freeholder will often offer you a more expensive premium compared to when adding 90 years under the formal route. The best advice is to obtain a RICS lease extension valuation for the formal 90 years and then use this to work out if the premium on offer the number of years is good value; if not, perhaps the formal route would be more advantageous.

• 3

  Instruct your solicitor

The process is:

• Your solicitor obtains your formal instruction, ID and proof of funds to pay for the premium
• Your solicitor receives the payment for your freeholder's solicitor fees
• Your freeholder sends across the new lease including new lease term, ground rent and any additional clauses the freeholder wants included
• New lease is reviewed, amended and agreed
• (if there is a mortgage) Completion of a Deed of Substituted Security
• Completion takes place where the lease premium is paid to the freeholder along with the freeholder's costs
• Registration of the new lease at the Land Registry

Free initial leasehold advice

Arrange a free consultation with one of our experienced conveyancing executives on:

• Lease extension.
• Purchasing the leasehold, freehold or share of freehold.
• Selling a leasehold property with a short lease.
• Extending the lease at the same time as you sell.

Arrange a Free Lease Consultation

We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:

• RICS Lease Extension Valuation or L2 Homebuyers Survey.
• Serving of the section 42 notice or section 13 notice on the freeholder.
• Negotiation with the freeholder (with the support of your RICS valuer).
• Completion of the legal work, including deed of variation.
• Application to Tribunal to determine the premium.
• Vesting order for absent landlords.

Informal lease extension costs

The leaseholder will usually be responsible for the freeholder's solicitor fees. You can expect to pay anything between £2000 and £4000 to informally extend your lease, excluding stamp duty costs and Land Registry fees.

The informal lease extension cost can be broken down into:

• £600 to £900* RICS lease valuation - if your freeholder refuses your offer, you might have to pay for the valuation fees as well
• £820 to £1,200** Leaseholder's solicitor fees
• £820 to £1,200 Freeholder's solicitor fees
• £15 Online ID fees
• £6 Official copy of register and title plan
• £10 Bankruptcy and priority Land Registry fee (if remortgaging)
• £TBC Stamp Duty Land Tax
• £TBC Land Registration fees

Read more - Lease Extension Cost