Why should I extend my lease now?
If the term of your flat’s lease has less than 80 years remaining then it becomes much harder to deal with (for example, selling or re-mortgaging) as it becomes significantly more difficult to obtain mortgage finance once the lease term falls below 80 years. We recommend commencing the process to extend your lease as soon as possible to avoid any unnecessary delays and/or financial consequences when coming to sell or re-mortgage your flat.
From a cost perspective, if the existing lease term falls below 80 years, then it is likely to become considerably more expensive to extend the lease as the premium will generally be calculated using an additional element which is called ‘marriage value’. Marriage value is not payable on any lease extensions which have over 80 years existing on the term at the time that the lease extension notice is served on the landlord.
Although it is essential to act before your lease term falls below 80 years, with the increased publicity and calls for leasehold reform we have found that purchasers are more concerned than ever before about the length of a lease and level of ground rent payable. We often find that lease extensions and the cost of the extension are being considered by purchasers even when a term is between 90 and 100 years.
The longer the lease, the less it will cost you to extend and therefore we would always recommend acting without delay.
Why should I extend my lease informally?
If your landlord is reasonable and you are confident that you can agree a fair premium for your lease extension with your landlord then it may be cheaper and quicker to extend your lease informally, especially if you are intending to sell or re-mortgage your flat. It is usually only beneficial to proceed informally if the premium is relatively small as you may be able to agree a premium without paying certain valuation and/or negotiation fees.
However, it is important to note that there is no obligation on the landlord to complete the lease extension (unlike under the formal route), so there is a risk that they may withdraw from the agreement before the completion of the lease extension or delay completing the transaction, particularly if the existing lease term is about to fall below 80 years (when the premium will become considerably more expensive).
What do I get when I extend my lease?
When you informally agree an extension of your lease with your landlord, you can agree any terms between you, including the length of the lease extension and the amount of the ground rent. As your solicitor, we will advise you if the length of the lease extension agreed and the amount of the ground rent is suitable for your objectives and, in particular, will advise you if the ground rent would be considered an onerous ground rent which may affect your ability to sell or re-mortgage your flat.
What is the cost of extending my lease?
The total cost of extending your lease will normally be comprised of the following:-
- Agreed Premium – this is the payment that will be made to the landlord in consideration for granting the lease extension. We recommend that you instruct a specialist lease extension valuer at the outset of the matter to advise you of the fair value of the lease extension.
- Your costs – this will include the cost of your solicitor and your valuer (if any), plus any disbursements, for example, Land Registry fees, bank charges, stamp duty, etc.
- Landlord’s costs – this will depend on what has been agreed with the landlord but generally it will be agreed that you will be responsible for the landlord’s reasonable costs including the cost of their solicitor and valuer (if any), plus any of the Landlord’s disbursements in connection with the lease extension procedure.
- Administration costs – if there is a third party to the lease, such as a management company, then they may charge a small fee for arranging to approve and sign the lease on behalf of the third party.
- Lender’s fees – if you have a mortgage over the flat, then you will need to obtain the lender’s consent to the lease extension. Your lender may charge a small fee for providing their consent to the lease extension.
How long will it take to extend my lease?
As the terms of the lease extension are already agreed once we are instructed, it should only take a number of weeks to complete the lease extension (depending on how responsive the landlord/their solicitors are).
Please note that the Land Registry is taking around 6 months to register a new lease after completion of a lease extension, however, if you are intending to deal with the flat (for example, sell or re-mortgage), then we can provide the Land Registry with evidence of an impending transaction and request that they expedite the registration.
What is the procedure for extending my lease?
As the terms of the lease extension have already been agreed once your solicitor is instructed, as your solicitor, we will investigate the title to the flat, request a draft lease from the landlord’s solicitor and negotiate the terms of the draft lease until it is in agreed form.
Once the lease is in agreed form, then the lease will need to be signed on behalf of both parties (and any third party to the lease) and we will obtain the consent of your lender to the lease extension (if required). Once these formalities have been carried out, the premium and costs will be paid to the landlord’s solicitors and the lease extension will be completed.
We will then deal with the post-completion formalities on your behalf, including paying any stamp duty and registering the lease at HM Land Registry.
How can LEASE Law help me extend my lease?
LEASE Law are specialist solicitors who can act on your behalf in respect of the legal requirements for extending your lease informally. In the vast majority of cases, we are able to offer a fixed fee for acting on your behalf.
The work that we will carry for you includes investigating title to the flat, negotiating and agreeing the terms of the new lease, obtaining your lender’s consent to the lease extension, completing the lease extension and registering the lease extension at HM Land Registry.
Please contact Jade Wilson (email@example.com or 0204 511 9100) or Joanna Botley (firstname.lastname@example.org or 0204 511 9101) for a no obligation discussion about your potential informal lease extension.