Bartletts Residential Conveyancer Khalid Mahmood takes you through the steps you can take.
Leasehold ownership means you own your house or flat on a lease basis but not the land it’s built on – that land is owned by the freeholder.
The freeholder is landlord to all the leases connected to the freehold. As leases run for a fixed term, they need to be extended before the expiry date or the freeholder can claim back possession of the property once the lease expires.
Why You Want A Long Lease
The longer the lease on your property, the more valuable it is. The opposite is true – the closer your lease is to its expiry date, the less valuable it is.
If your lease becomes less than 80 years in length, your freeholder is able to claim the marriage value of the lease extension. The marriage value is 50% of the difference in value between your property with the current lease and the value of your property after the lease has been extended – depending on your property, this can be a huge amount of money.
Therefore, it is vital to extend the lease before the term gets as low as 80 years. At this point, your property becomes much harder to sell too as most lenders won’t lend on shorter leases.
How To Extend Your Lease
There are two main options for extending your property lease:
- Informal Lease Extension – this is also called an extension by agreement
- Formal Lease Extension – this is also called a section 42 or statutory lease extension
Whichever option you choose, your freeholder is entitled to a so-called premium payment, paid on completion of the lease extension. Normally, an external valuer is asked to provide a fair amount for this and then it is down to the leaseholder to negotiate the final settlement with the freeholder.
Once all the terms have been agreed and premium payment value settled, your and your freeholder’s solicitors will issue the lease extension documents.
How We Can Help You With Your Lease Extension
Whether you’re the leaseholder or freeholder, our specialist property solicitors have the experience and expert legal knowledge to help clients with a range of legal issues related to lease extensions.