A guide to lease extensions

When you buy a leasehold property, you’re actually just buying the right to live there for a certain amount of time. This length of time is determined by the lease, and will vary depending on when the property was built and when the lease was last renewed. If you let the lease run out, the property reverts to the freeholder.

This horrifying prospect is fairly unlikely, but properties with fewer years remaining on the lease will be worth much less, and they can be very difficult to sell since potential buyers will struggle to get a mortgage.

What is a lease extension?

Fortunately, leaseholders can negotiate extensions to their leases, either by cutting a deal directly with the freeholder, or by exercising a statutory right which allows them to extend their lease by 90 years at a ‘peppercorn rent’ (meaning no ground rent is payable). Both options can be reasonably costly, and you have to meet certain criteria if you want to go down the statutory route. The original lease needs to have been for more than 25 years (however much time it had remaining on it when you bought it), and you need to have lived in the property for at least two years.

The idea of a statutory lease extension is that you negotiate a figure with the freeholder which compensates them as accurately as possible for their potential losses in allowing you to extend the lease.

When to get one?

It’s really important not to let the length of your lease fall below 80 years if you possibly can. That’s because for leases of less than 80 years there is an additional cost called ‘marriage value’ that has to be factored into the compensation you pay to a freeholder, and this can drive the price of the lease extension up substantially.

Of course you may not have a choice in the matter, since trying to sell a flat with fewer years left on the lease means your potential buyers won’t be able to get a mortgage approved. By the time you get to 60-year leases, you’re more or less limited to cash buyers only.

How to get one?

You could try negotiating your lease extension directly with the freeholder. Failing that, you can exercise your statutory right to extend your lease by 90 years, so long as you’ve lived in the property for two or more years.

If you want to go ahead with this, you’ll most likely want to enlist the help of a solicitor and a surveyor, both with experience of lease valuation and extension. These people will need paying whether or not you go ahead with buying the lease extension, so you’ll need to know you’ve got the funds to see it through.

The process is reasonably complicated, and involves serving the freeholder with a notice where you make them a calculated offer, almost always based on a professional valuation of the lease. They will then get their own valuation done and either accept your offer or come back with a counter offer. If you can’t reach an agreement then it will need to go to the First Tier Tribunal (the same place where you go if you want to dispute your service charges).

A leasehold extension is also an opportunity to negotiate updates to the terms of your lease (which may well be a bit archaic or illegal if the lease has run for a long time).

The Leasehold Advisory Service has produced a full guide to the process.

How much will it cost?

Lease valuation is a fiendishly complicated and inexact art, but there are a few different things to factor in.

Clearly a freehold is much more valuable if the flats in the building are about to revert to the freeholder than it is if the leases have 100 years to run, so extending your lease will reduce the value of your freeholder’s investment. You’ll need to compensate them for this, along with their losses from the ground rent you’ll no longer be paying.

If the lease has less than 80 years to run, you’ll also need to pay ‘marriage value’. The principle behind this is that a flat with a shorter lease is going to go up substantially in value when you whack an extra 90 years on the clock. Since this profit is entirely due to the freeholder allowing you a lease extension, you’re required to share the projected spoils 50:50 with them. For leases over 80 years, it’s assumed that there will be no increase in value (whether or not this is actually true).

There are lots of lease extension calculators out there, but the one on the Leasehold Advisory Service website reckons that for a £240,000 flat (roughly the UK average) with 85 years left on the lease, you’d be looking at £5,000-£6,000 for a lease extension.


Remember you’ll also need to cover legal and professional fees for both yourself and the freeholder, which could easily stack an extra couple of grand on the bill.