How much does it cost to extend a lease is one of the most common questions we face.
We would love to give a clear and straightforward answer – but unfortunately it’s quite complicated. However, when extending your lease, you will need to pay the following factors.
A premium to your freeholder to extend the lease
If you agree a voluntary lease extension without the need to issue a formal notice, then it’s really up to you and your freeholder how much you pay.
However, if you opt to choose the formal statutory route to lease extension, whereby you need to issue a formal notice etc, there are a number of factors which any valuer needs to take into account when calculating the right price.
NB in our experience, it’s well worth appointing a specialist surveyor – because, to be frank, most surveyors rarely if ever come across lease extensions and do struggle with them. Instruct us and we are happy to organise a surveyor for you who knows what they’re doing when it comes to lease extension, and who is local to your property]
When coming up with the right valuation, it’s worth noting that every lease varies as there are a number of factors involved, including the location of the property, property price and the length of the lease term remaining. In particular, the premium or compensation which you will have to pay to your freeholder in order to extend your lease is made up of a number of factors including:
1. The reduction in the value of the freeholder’s interest – which, in broad terms is how much your landlord’s interest in your property is now, compared with the that value after the lease extension
2. The Marriage value. This only applies when the lease term is under 80 years – but it can make quite a difference to the price – usually £000s. That’s why it is critically important to get your lease extension before the remaining term of your lease drops even one day below that critical 80 year period
3. the amount of ground rent payable under the lease
In the most general terms, however your property is super expensive [e.g. a flat in London’s Grosvenor Square], or your lease is down to his last few years, the premium is usually somewhere between £3K and £50K.
Professional costs in extending a lease
Leasehold extension is tricky and there are many traps for the unwary, not least in the timetable. We strongly recommend that you appoint both a specialist solicitor who can guide you through the procedure, and a specialist surveyor who can accurately value the right price for your lease extension.[Click here to read more about reasons for appointing a specialist lease extension solicitor]
So, in looking at how much it costs to extend your lease, you should add in the following professional costs;
1. Your solicitor’s fees – for your information, we charge on an hourly rate, but to give you a rough idea, the average fees we charge for a routine lease extension will be in the region of £700 plus VAT for a voluntary or informal extension and around £1200 plus VAT if you choose to go down the statutory route.
2. Your surveyors fees
3. The reasonable legal costs of your landlord – to go down the statutory route, although the landlord has to grant your 90 lease extension, you also have to pay his legal costs – but they must be reasonable. In allowing for landlords legal costs, it’s worth noting that our team provide specialist city quality work at very competitive local prices – so don’t be surprised if your landlord’s costs are a little higher than the figures we quote above
Statutory lease extension is designed to profit and incentivise the leaseholder
It’s important to remember, when looking at the cost of extending a short lease that the system was originally introduced to support home ownership. As a result , and provided you get the right valuation first place, even after paying the premium to your freeholder and paying all relevant professional costs, the rise in value of your flat almost inevitably significantly exceeds those costs, leaving you in profit.
In short, lease extension is one of the few areas where paying a solicitor is highly likely to actually makes you money!
Looking to sell your flat, but haven’t got enough money to pay for a 90 year lease extension?
Don’t worry – you have two alternatives;
1. firstly, your solicitor can issue a notice to your freeholder to start the statutory procedure to increase your lease by 90 years – and your solicitor can assign, as part of the contract of sale of your property, the benefit of that application to the purchaser. This is particularly important because it means that the purchaser won’t have to wait until two years of ownership is up before applying for their lease extension – they can simply continue with the application for a 90 year lease extension started by you and your solicitor. If you got a short lease, this can make a real difference to your chances of getting a decent price for your flat on sale
2. You can negotiate a short lease extension with your landlord. However, there are risks in going down this route – not least the fact that your landlord is not obliged to go ahead with the lease extension and can drop out at any stage. It may also find, that as part of the terms of a voluntary lease extension, the landlord may seek to impose other owners terms under a new lease, e.g. a significant increase in the ground rent, which could put off future purchasers, and make your property more difficult to sell
Looking for specialist help to extend your lease?
Our team is highly specialist – lease extension is all they do. Get in touch with us today.
- Just call us on FREEPHONE 0800 1404544 for a FREE initial phone consultation and a FREE quote for your lease extension, OR
- Complete the email contact form below