A guide to extending your leasehold
Under the Leasehold Reform, Housing and Urban Development Act 1993, a leaseholder in England or Wales who has owned their flat for two years or more has the right to extend their lease by 90 years. Beyond the obvious benefit of extending your right to live in a property that is considered home, an extension beyond 70 years would attract considerably more mortgage lenders and therefore make your lease easier to sell in the future.
In exchange for having your leasehold extended, you will be required to pay your landlord a premium (see further details below).
As a general rule, the earlier you initiate a leasehold extension the better. If your lease has a term of 80 years or less, you will be required to pay an additional payment of half your flat’s “marriage value”. Essentially, marriage value is the additional value to the flat after a new lease has been granted.
The process of extending your lease is typically completed within a year, but could take no more than 3 months.
We would always advise that you instruct an experienced solicitor before embarking on a leasehold extension as the process can be very complex. Once instructed, your solicitor will notify your landlord that you wish to extend the lease. There is a statutory timeframe in place that will dictate the steps and timeframe that each party must comply with.
Next, you must appoint an expert surveyor who will be able to value your lease extension and determine the premium that you are required to pay. The premium will be calculated in accordance with the following factors:
- Your flat’s value;
- The remaining years on your lease;
- The yearly ground rent;
- The value of any improvements that you have contributed to the flat; and
- Other economic factors.
Once the surveyor has completed their valuation, your solicitor will serve a formal “tenant’s notice” on your landlord detailing the premium that you deem payable. If your landlord accepts the premium offer, your solicitor will formalise the leasehold extension as agreed between the parties.
Alternatively, your landlord may wish to negotiate the premium payable by you. If you are unable to reach an agreement, you can make an application to the Property Tribunal who have the power to determine the appropriate premium. Following the resolution of any Tribunal proceedings, your solicitor can then formalise the leasehold extension.
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