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The Marsden Chartered Surveyors guide to lease extensions

A Lease is the right to live in a property for a fixed term of years. The ultimate owner of the property is the freeholder or landlord.  Once the lease runs out, in theory, ownership will go back to the landlord. Most leases are for a set term - 99 or 125 years and the landlord is usually paid a small rent known as a ground rent every year for the length of the lease.  
The shorter the lease on your property, the less valuable your property will become.  It will also be more difficult to sell or for you to re-mortgage.

In the past, lease length was less of a problem, but today because of tighter mortgage lending requirements and a more careful approach from legal advisors, it is considered necessary to extend any lease with less than 80 years to run.
There are two main ways in which you can extend your lease. They are what we call the ‘formal’ and ‘informal’ routes.

The ‘formal’ process

In order to make things fairer for the owners of leasehold property (leaseholders) – previous Governments have created legislation which, in most cases, gives the leaseholder the right to extend their lease or to purchase a share of the freehold.

In order to have the right to extend in this way leaseholders must fit certain criteria, these include – the original lease must have been for a term considered ‘long’ – (more than 21 years) and the property must have been owned for at least two years.  (There is a way for someone purchasing a property to acquire the right to extend from the seller).
The legislation gives those qualifying the right to extend their lease for an extra 90 years on top of the existing unexpired term - that is the number of years still left on the current lease.  The new extended lease will also have a zero ground rent.

As the landlord is now having to wait much longer until the end of the new lease and will also not be receiving any ground rent, it is only fair that they are paid some money in compensation. This is called the Premium.  There is a set formula to calculate this premium but there are so many different factors that go into the calculation that there is never one final figure. This is why you need professional advice from experts.

The formal process involves the serving of legal notices and set timescales and procedures. It is legally based and involves co-ordination between your solicitor and your surveyor. Ultimately if you qualify, the freeholder has to agree to extend your lease, the only thing to be agreed is the premium and new lease terms.  As there is a strict timescale, if after a set time the negotiations have not been concluded, either party can apply to have all matters that have not been agreed, decided by the Leasehold Valuation Tribunal. 

 

The  ‘informal’ process

Increasingly, lease extensions are being agreed outside the confines of the relevant Acts.  This more informal approach involves open discussions with the landlord to try and agree a new extended lease. The landlord is under no obligation to agree the extension but if the terms and the premium are reasonable, then agreement is often made. A new lease agreed in this way typically has a new 99 or 125 year term and ground rent is usually still payable. All terms, premium, lease length and ground rent are negotiable and as long as both parties agree, almost anything can be decided upon.

This process often begins with the leaseholder contacting the landlord and asking how much it would cost to extend their lease. The freeholder may come back with a premium and lease proposal, but how does the leaseholder know that the figures are reasonable?   Sometimes the freeholder doesn’t want to deal directly with the leaseholder and getting them to quote a premium may be difficult. 

So how we can help you? 

Whichever process you follow – Marsden Chartered Surveyors are there to advise you every step of the way.
If you are thinking of selling your property and need to know how much it will cost to extend your lease before you put it on the market.
If you simply want to extend your lease to protect the value of your property.
If you have not yet made contact with your freeholder, or have already been told by the freeholder how much an extension will be.

Whatever your needs,  we can help you
With easy to understand advice and clear guidance, we can steer you through the complicated world of lease extensions.

What we offer
We offer a two part service which has been created to give you the advice you need when you need it and to keep your costs to a minimum.

The first stage is an inspection and valuation. We will inspect your property and provide you with a valuation report outlining your options and the likely costs involved. We will give you figures based on both an ‘informal’ and ‘formal’ approach.

As the premium figure is dependent on many different factors, for each option, we will provide you with a range of likely premiums and from within that range we will suggest a premium which we believe to be both reasonable and justified.         
          
Once we have sent you the report, we will then be available to give further help and guidance. If at this stage you opt for an ‘informal’ process and you feel you are able to negotiate directly with your freeholder, we will support you and help you along the way. This service is included in the single fee for the valuation. If you decide that the formal approach is more suited to you, we will work with your solicitor to advise them on the correct premium to quote in the initial notice.

Whichever route you take, for an additional fee, we can negotiate your lease extension for you.

If you have served a ‘formal’ notice, then you will usually need a surveyor to negotiate with the freeholder’s surveyor.  If you are not comfortable negotiating directly with the freeholder in an ‘informal’ process, we can do it for you.  Again, this second stage will be for a fixed fee and this will cover all negotiations up until an agreement is made. 

If the matter has to be referred to the Leasehold Valuation Tribunal, we will charge an extra hourly fee for all additional work involved, including attending the tribunal if required and acting as an Expert Witness.  

If you need legal advice, we can put you in touch with expert firms of lawyers who we have worked with successfully in the past.  

Extending your lease can be a complicated and difficult process. Let Marsden Chartered Surveyors make it easier for you.

For more advice give us a call or use the Contact Us page. We will be in touch as soon as possible to discuss your specific requirements.