Leasehold is a home ownership type in the United Kingdom, particularly in England and Wales. While it has its benefits, those benefits are not at the forefront during the extension process, which can be time-consuming, frustrating, and expensive.
However, with the right information and tools at your disposal, extending a lease doesn’t have to be a complete hassle. Here is our guide to extending a leasehold property lease.
A Guide to Leasehold Ownership
So, what exactly is leasehold ownership? When you hold a lease, that means that you own the right to occupy a property for the duration of the lease. You don’t own the property or building in perpetuity—that belongs to the freeholder or the landowner.
Leasehold ownership is the most common form of home ownership when it comes to apartments in England and Wales.
It is sometimes more convenient than outright owning a property, especially when living in a building shared with many different families. Some single-family homes in certain areas, for example, Sheffield, also primarily fall under leasehold ownership.
When Should You Extend Your Lease?
Leases can come with differing lengths, some as short as 21 years while others go as long as 90 years or more. Luckily, lease extension is not a process that you must think about very often, but here are the situations where you should extend your lease.
One is if you are coming towards the end of your lease term. Extending your lease becomes more expensive under 80 years, so if you see on the terms of the original lease that you are nearing that mark, start the extension process as soon as possible.
Another is if you are planning to sell the lease and your apartment or house. Prospective buyers will have trouble getting mortgages if the leasehold property they are buying has a short-term lease, which is essentially anything shorter than 80 years.
What Are Some Common Lease Extension Criteria?
There are a few criteria you have to meet to be eligible for a lease extension:
- You have to own the lease for at least two years
- The lease has to be a long lease (longer than 21 years). This doesn’t count the number of years left on the lease but the number of years on the lease when it was signed originally.
If you meet the eligibility criteria for extending your lease, the freeholder legally has to grant it to you.
Professional Advice Needed to Extend Your Lease
You shouldn’t try to extend your lease on your own. Find a lease extension solicitor, one that is a member of the Association of Lease Extension Practitioners (ALEP) or a member of the Royal Institution of Chartered Surveyors.
A solicitor is crucial because you need legal expertise to review the terms in the lease extension process and make sure that the new lease does not include provisions that may be disadvantageous to you.
Another expert that you need is a valuation surveyor. This professional can conduct a full valuation of your property, and help you negotiate the premium of your lease extension. This way, you know ahead of time how much you can expect to pay for a lease extension.
Many leaseholders are tempted to save money by doing everything themselves and entering an informal extension process. However, this leaves you vulnerable to unfair terms in the lease and unfair premium, which could ultimately cost you substantially more money.
What Happens After the Lease Extension?
After your solicitor helps you serve the section 42 notice to the freeholder and you pay the deposit, the freeholder can accept or counter.
Usually, freeholders accept your claim and counter with a higher premium. If there is a dispute regarding premium, your solicitor and surveyor will represent you in a First-tier Tribunal to help you reach an agreement.
Once you reach an agreement, you pay a deposit and the fees (including your freeholder’s legal and valuation fees), and then you have your lease extension which is 90 years on top of the existing term.