16 Mar Our Guide to Extending your Lease
If you are thinking about extending your lease, it can be a long and complicated process and you may need professional help and support to guide you through the process.
Before I start, how much will it cost me?
It depends on the value of the property, the number of years left on the lease, the annual ground rent, the value of improvements done to the property paid by the leaseholder and external factors such as expected rate of returns on investments. It is a complex calculation, but also a subjective one. Like trying to define the value of a house, there is not necessarily a “right” answer to the value of a lease extension, which means it will be subject to negotiation – or decision by a tribunal.
Can I calculate the cost myself?
You can get a rough idea of how much it will cost using online lease extension calculators, but unless the amount is below a few thousand pounds, it is worth paying a Chartered Valuation Surveyor to calculate it for you. This will cost you a few hundred pounds, but will probably save you from paying over the odds and will provide you with peace of mind that you have a correct price.
What other costs do I have to pay?
On top of the cost of the lease extension, you have to pay:
- Legal costs (a solicitor)
- Valuation costs (a surveyor)
- Negotiation costs (normally done by the surveyor)
- Land Registry fees
What are the steps involved?
- Step 1 – Speak to your freeholder. You may find he or she is happy to negotiate informally and willing to consider your offer straight off, without having to involve anyone else. This may save you time and money and it could help you reach a lower price on the lease. But beware – statutory lease extensions remove the requirements to pay ground rent. Informal extensions will probably include ground rent, which could make the lease a lot more expensive to extend again in the future.
- Step 2 – Find a Chartered Valuation Surveyor. You need to find a surveyor with a good understanding of both the legislation and the local property market. Watsons have over 125 years industry experience and can provide you with professional advice and support.
- Step 3 – Find a solicitor. If you know of a good solicitor, go to them first or Watsons can provide you with a recommendation.
- Step 4 – Make a formal offer. If the leaseholder didn’t accept your informal offer, you will have to serve tenants’ notice – your solicitor will able to take care of this.
- Step 5 – Pay the deposit if one is required by the landlord. This will either be £250, or 10% of the lease cost in the tenants’ notice, if that exceeds £250. If the landlord does require a deposit, this will have to be paid within 14 days, so it’s important to have this money readily available.
- Step 6 – Negotiate a price
If the freeholder doesn’t accept the amount you’ve offered you will have the option to negotiate. Then if you still can’t come to an agreement, you will have to apply to the First Tier Tribunal (Property Chamber), but tribunals can be time-consuming and expensive, so it’s best to avoid this if you can.
How long will all of that take?
The process normally takes from 3 to 12 months, and it can be made quicker by efficient valuers, solicitors and other professional help, so choose these people wisely.
Is it worth trying to buy the freehold instead?
It could be worth buying the freehold on your home so that you own it outright. However, there could be complicated legal procedures and legal costs involved in this process and you will have to get over half of all the leaseholders to agree.
More guidance can be found on the RICS website, which you can view by clicking here.
If you would like to discuss Watsons’ lease extension service further, please contact the Valuation & Survey Department on 01603 751577 or email@example.com.