Owners of leasehold flats and houses will need to extend their lease from time to time to prevent the remaining years from running down. A lease with below 80 years remaining can devalue a property. Mortgage lenders will often not lend once a lease drops below this level which not only affects the sale price but also makes it hard to find a buyer. We look at the lease extension process and answer the question, ‘How much does it cost to extend a lease?’
What is a lease?
A lease gives someone the right to an asset, such as a flat or house, for a specified period of time in return for rent payments. If you own a flat, you will generally have a long lease. Some houses are also leasehold.
A freeholder, also referred to as the landlord, owns the land and building. In some cases, the freeholder may be a flat management company.
What is a lease extension?
A lease extension is a formal lengthening of the lease. A long lease is often initially granted for 99 years or 125 years. Over time, as the term remaining on the lease drops, the leaseholder will usually have the right to extend the lease in return for a payment to the landlord.
Why would you extend a lease?
Eventually, a lease will run out if it is not extended. It is also the case that once the number of years remaining falls below 80, the cost of extending it will increase because an extra premium, known as ‘marriage value ‘ is added to the cost.
Lenders typically are hesitant to lend as soon as the lease is under 80 years, or is approaching this deadline.
How much does it cost to extend a lease?
The cost to extend a lease includes a premium which is payable to the landlord to as well as lease extension surveyor costs and lease extension solicitors’ costs.
The premium is based on the current market value of the lease, which will need to be valued by a surveyor with leasehold extension expertise as it is a complex valuation.
As well as your legal costs and the surveyor’s fee, you will also need to pay the landlord’s reasonable legal costs and the Land Registry fee for registering the extension.
How can I calculate the cost of a lease extension?
To extend a leasehold, costs include several different components. If you would like an estimate of the cost to extend a lease, you are strongly advised to speak to professionals. A lease extension valuer is needed to calculate the premium and lease extension solicitors will be able to advise you of the overall costs.
If you would like an estimation on the cost of a lease extension, you can use a lease extension calculator.
When is it not worth extending a lease?
It is anticipated that the Leasehold and Freehold Reform Act 2024 will take effect in 2025 or 2026. This may make it cheaper for someone with less than 80 years remaining on their lease to extend, as the marriage value element of the premium will be eliminated.
You will also be able to extend your lease for 990 years rather than the current 90 years.
If you want to know what the best option is for your circumstances, speak to a lease extension lawyer who will be able to advise you in light of the number of years left on your lease and any other relevant circumstances.
How can I keep lease extension costs down?
To date, the best way of keeping lease extensions costs down has been ensuring you extend before the term remaining falls below 80 years. Once the new legislation is in force, this may no longer be an issue.
You may be able to agree on an informal extension with your landlord, which may be a better value deal, but there is a risk that they could decide to pull out or ask for more money at the last minute.
If you use the formal route, which involves serving an official notice on the landlord, then they cannot decide not to go ahead.
Contact our lease extension solicitors in Bristol today
If you are considering extending your lease and you would like to know the cost of a lease extension, we will be happy to speak to you and answer your questions.
To find out more about our services, see our lease extension solicitors in Bristol page.
You can speak to one of our lease extension solicitors now by contacting your local Henriques Griffiths office in Bristol or Winterbourne.
Or use our simple enquiry form to ask a question or request a call back.
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