Are you thinking about extending your lease but don’t know where to start? This comprehensive guide will tell you everything you need to know about extending a lease in the UK, so you can avoid making costly mistakes.
What Is a Lease Extension?
Leasehold ownership of a property in the United Kingdom gives the owner the right to live in or use the property for a set period of time, typically 99 or 125 years. At the end of the lease, the property reverts back to the freeholder.
Leaseholders have the right to extend their lease by a further 50 years, providing they meet certain criteria. The process of extending a lease is known as leasehold enfranchisement.
Leasehold enfranchisement can be a complex process, and there are a number of factors to consider before starting the process. These include the length of the remaining lease, the cost of the extension and the terms of the lease.
It is important to seek professional advice before starting the leasehold enfranchisement process, as there are a number of potential pitfalls. These include the freeholder refusing to grant an extension or the leaseholder being unable to meet the terms of the extension.
Why Should You Consider Extending Your Lease in the UK?
There are several reasons why you might want to consider extending your lease in the UK. Here are just a few of the benefits that you could enjoy:
1. You Could Increase the Value of Your Property
You could potentially increase the value of your property by extending your lease. This is because a longer lease is often seen as more valuable than a shorter one. As a result, extending your lease could make your property more attractive to potential buyers in the future.
2. You Could Make Your Property More Liveable
If you extend your lease, you could also make changes to your property that would make it more liveable. For example, you could add an extension or make other improvements. This could make your property more comfortable to live in and could potentially increase its value.
3. You Could Avoid the Hassle of Moving
Moving houses can be quite a stressful event. If you want to avoid the hassle if you are happy with your current property, and you do not want to go through the process of finding and buying a new one, extending your lease can be a better option.
4. You Could Stay in Your Current Property for Longer
If you extend your lease, you could stay in your current property for longer. This could be particularly beneficial if you are happy with your current property and do not want to move.
When Is the Right Time to Extend a Lease in the UK?
There are several factors to consider when deciding on the time to extend your lease.
The first is the length of your current lease. If you have less than 80 years left on your lease, it is generally advisable to extend it.
This is because once your lease gets below this threshold, it becomes much more difficult and expensive to sell your property.
Another important factor to consider is the current market value of your property. If property prices in your area have increased significantly since you purchased your lease, then extending your lease may be a good investment. This is because you can sell your property for more than you would if you had a shorter lease.
Of course, there are also financial considerations to take into account. Extending your lease will usually involve paying a premium to the freeholder. This is typically calculated as a multiple of the current value of your property. The longer the lease extension you want, the higher the premium will be.
Finally, you need to think about your personal circumstances. Are you planning on selling your property in the near future? If so, then it may not be worth extending your lease. However, if you are planning on staying in your property for the long term, then extending your lease may be the best option.
How Do You Do Lease Extension in the UK?
Extending a lease can be relatively simple or quite complex, depending on the circumstances. In most cases, the tenant will need to serve a notice on the landlord, proposing terms for the extension. The landlord then has two months to accept or reject the proposal.
If the landlord rejects the proposal, the tenant can apply to the Leasehold Valuation Tribunal (LVT) to determine the terms of the extension. The LVT will consider a number of factors, including the value of the property, the length of the remaining lease, and the landlord's reasons for rejecting the tenant's proposal.
Once the terms of the extension have been agreed upon, the tenant will need to pay the landlord a premium for the extended lease. The amount of the premium will depend on many factors, including the length of the original lease, the length of the proposed extension and the value of the property.
If you are considering extending your lease, it is important to seek professional advice to ensure that you are aware of all of the potential pitfalls. Lease extension can be a complex process, and it is important to make sure that you are fully informed before proceeding.
How Much Does Extending a Lease Cost in the UK?
When it comes to extending a lease, there are a few different costs that you need to be aware of.
First and foremost, there is the lease extension premium, which is payable to the freeholder. This is typically calculated as a multiple of the property’s current value and is usually around 50 to 100 per cent.
In addition to the lease extension premium, there are solicitor’s fees, surveyor’s fees and freeholder fees. These can all add up, so it’s essential to get an accurate estimate of the costs before you commit to extending your lease.
The surveyor’s fees will depend on the property's value but are typically around £500 to £1,000. The freeholder’s fees can also vary but are usually a percentage of the lease extension premium, usually 10 to 20 per cent.
Finally, you will also need to pay for a surveyor to value the property and for the Land Registry to register the extended lease. These fees are typically around £200-£300.
In total, the cost of extending a lease can range from a few thousand pounds to tens of thousands of pounds. It is, therefore, important to get professional advice before proceeding, to make sure that it is the right decision for you.
Final Thoughts
A lease extension is a process that can be used to extend the term of your leasehold agreement. This can be beneficial if you want to stay in your property for longer than the original lease term or if you want to sell your property and extend the lease to make it more attractive to buyers. The process can be complex, so it's essential to seek professional advice to ensure it's carried out correctly.
If you want to learn more about the conveyance of property, check out Conveyancing Calculator today. We provide residential conveyancing quotations to help people move and sell houses, or remortgage their property in the UK. Get in touch with us today to learn more.
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