What is a lease extension?
Leasehold properties, such as flats and maisonettes, are typically leased by a freeholder (the landlord) to a leaseholder (the tenant). Leases usually run between 99 and 125 years.
If the leaseholder does not extend a lease before it runs out, then ownership of the residential property returns to the freeholder.
Why extend your lease now?
A leasehold property with a short lease (less than 80 years) can be difficult to sell for the market value and to re-mortgage if needed. Many mortgage companies will not lend on properties with less than 70 years to run on a lease.
As the market value of your property increases over time, the cost of extending your lease will go up too, so it is better to extend it sooner rather than later.
On top of this, when a lease has 80 years or less left to run, the freeholder can charge extra to extend the lease. This is known as ‘marriage value’ under the Leasehold Reform Act 1993. The amount is equivalent to 50% of the increase in value that will happen due to the lease being extended.
We recommend extending the lease on your property when you have between 85 and 95 years left to run to save yourself significant expense. If your lease is almost down to 80 years, we strongly recommend that you speak to us so we can help you to avoid paying ‘marriage value’, which can amount to thousands of pounds.
Extending your lease also has the benefit of reducing your ground rent. Under the Leasehold Reform Act 1993 ground rent is replaced by a small ‘peppercorn rent’, saving you money every year.