Solicitors to extend a long lease
With a reputation as 1 of the UK's largest, fastest growing and most popular property law firms, we are an ideal choice if you need to extend your lease. With over 30 lawyers who specialise in and have experience with lease extensions, and over 10 office locations in London alone, we will get the job done for you as quickly and proactively as possible at a competitive cost.
What is a lease extension and why is an extension needed?
The need to extend the lease to a flat which you bought with a lease of many decades comes as a surprise to many flat owners. The need to extend is due to to a very large number of houses having been converted into flats in the last 50 years (especially in or around London). Many leases granted at that time were for 125 years.
If you have owned the long leasehold of your flat for more than 2 years, your freeholder cannot prevent you from extending, typically back up to 125 years remaining term (although often longer by consent). You have the statutory right to extend and there is a formula for calculating what the premium should be depending on some variables, not least the number of years left. This means that most lease extensions are in reality concluded reasonably quickly, by consent with the freeholder. It is common to start the statutory process, in parallel, known as the section 42 process, to ensure the freeholder recognises that it is not in his/her/it’s interests to be difficult or suggest an unreasonable premium.
The main reason prompting the need to extend a long lease is when selling (because your buyer will probably need a mortgage) or remortgaging. Policies of lenders change over time and mortgage lenders now generally require a lease to have 80 years or more left before they will lend. The 80 year limit is largely linked to the fact that once the lease has 80 years or less to run, the freeholder is entitled to a higher premium to extend.
How much does a lease extension cost?
The premium payable to extend the lease will vary upon factors including the length of the lease and the value of the flat. In most cases, where the lease has between 80-90 years left, the premium will typically be somewhere between £10,000.00 to £20,000.00. If the lease already has less than 80 years left, the cost will increase based on a statutory calculation and formula known as “marriage value”
There are additional costs which you will need to pay. In addition to your own legal fees (most solicitors including ourselves charge around £1,500.00 plus VAT if the extension is agreed after service of a section 42 notice), you will also have to pay the freeholder’s legal fees, of around the same amount and also your existing mortgage lenders fees for agreeing a formal deed of variation of lease.
Finally, you will usually need to pay your own surveyors’ fees and possibly also the freeholder’s for calculating what the appropriate premium for the extension should be.
Overall, you should expect to pay professional fees of not less than £5,000.00 plus VAT.
What about share of freehold properties?
With many flats in converted houses, the original seller had no interest in remaining as freeholder after the flats were sold off, because the freehold then has residual value only but the freeholder still has legal obligations under the lease. So, with many converted houses, the freehold was also transferred at the time the flat leases were created. In that situation, leaseholders also own a share of the freehold either registered in the names of all the current long leasehold owners or a company has been set up to own the freehold. In a shared freehold situation, it is generally not in any of the leaseholders interests to charge each other to extend leases, as all will need to extend. In this situation, the common approach is to extend all the leases at the same time, with legal fees and lenders fees for a deed a variation being the only cost.
We are often instructed to act for all leaseholders in this situation, so please do contact us.
Possible complications with a lease extension
The 2 main potential complications with a lease extension are :-
- Missing freeholder - Where the current freeholder on the Land Registry title cannot be found, this being known as absentee freeholder. The main issue here is delay and additional cost as a court application is needed to resolve the issue.
- Extending because you want to sell your flat - If the remaining length of your lease is not long enough to satisfy your buyer's mortgage lender, to get the transaction through you will need to ensure the the lease can be extended after completion. The problem with this is that the buyer will not have owned the property for 2 years, which is the requirement to force the extension. The solution is generally for you as seller to start the statutory notice and then transfer (assign) the rights to the statutory notice to your buyer after completion.