Your home Extending your lease

A lease extension is a legally binding agreement that allows the leaseholder to continue their existing lease beyond its original end date without renegotiating the core terms and conditions. 

Extending your lease helps to protect your property’s value, improve mortgageability and saleability. 

The cost of extending a lease increases sharply once it falls below 80 years. This is known as ‘marriage value’ and the formula used to calculate the cost of the lease extension also takes into account the increased overall market value of the property with an extended lease. The increase is then shared equally between the leaseholder and freeholder. 

There are two ways to extend your lease, the route that applies to you will depend on whether you are a shared owner or a full leaseholder. Both the voluntary and statutory processes are explained below followed by the options available to you based on your ownership and property type. 

Once we receive notification from you that you would like to extend your lease and you have paid your valuation fee we will arrange for a RICS accredited Chartered Surveyor to visit your home and calculate the premium to extend your lease.  

A lease extension premium is the sum a leaseholder pays to the freeholder to extend the lease on a property, compensating the freeholder for lost income and the increase in property value. 

We will write to you to advise you of the premium and ask you to confirm if you would like to proceed. You will need to make an undertaking to pay our legal and administration costs. 

On completion you will be issued with a new lease for a term of 90 years on top of the remaining term of your existing lease, for example is you have 85 years remaining on your original lease and extend your lease, you will increase the overall term of your lease to 175 years.  

If you are required to pay Ground Rent under your lease, which is a separate charge to rent on the unowned share and service charges you will need to continue to pay this for the entirety of the original remaining term of your lease. If the original remaining term was 85 years, Ground Rent will continue to be payable for 85 years. Your lease contains further information regarding Ground Rent and will specify what you need to pay. 

We recommend that you to take independent legal advice as to the level of premium to be paid for the lease extension and the terms to be included in the new lease. We also advise you to visit the Leasehold Advisory Service website www.lease-advice.org for an explanation of how the lease extension process works. 

Completion of a voluntary lease extension can take approximately 3 months under typical circumstances but may extend to 6 months if queries are raised and changes required.  Some leases require a Deed of Variation to extend the lease. In this case the process is more likely to take 6-18 months as it requires additional legal review and agreement from both parties. Completion time scales can vary based on Solicitors workload and negotiations.

A statutory lease extension allows qualifying leaseholders to extend their lease by 90 years with zero ground rent through a formal legal process. The premium to extend your lease is calculated in accordance with rules set out in the Leasehold Reform, Housing and Urban Development Act 1993.  

You will need to obtain your own valuation advice from a valuer who specialises in lease extension work to assist you in calculating the premium.  

In addition to this you will be responsible for your own legal and valuation costs and Hightown’s reasonable legal and valuation costs. You will need to pay these costs even if you commence the procedure and decide not to carry on. 

Lease extensions through the statutory procedure start when your solicitor serves a formal notice under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act) on Hightown (this is called a Section 42 Notice). 

The Notice must include the amount you are offering to pay us for the extension and any different terms you would like to include in the new lease. As there is limited ability to vary the terms of your lease, we advise that you obtain independent advice before serving the Notice.  Your solicitor must ensure that the Notice is served in a valid form. 

When you serve a Notice, we have two months to respond to you by serving a Counter Notice. Once you have paid the valuation fee, we will engage a RICS accredited Independent Chartered Surveyor to value your property and assess your proposals. If we disagree with your proposals for the lease extension, the terms for the premium and lease terms will be set out in that counter notice. We will then try to resolve any disagreement by negotiation. Once terms are agreed, a new lease is entered into. 

Should we be unable to agree, the statutory rules allow the First-Tier Tribunal (Property Chamber) to decide on the price you pay and the terms of the new lease. Each party would be responsible for their own costs for an application to the Tribunal. 

For further information we recommend that you review the Government sponsored website at www.lease-advice.org, which has a guide on how the lease extension process works. There is also a calculator on this site you can use to obtain a rough idea of what the premium is likely to be. 

You must use the voluntary route as shared owners are not qualifying tenants under the Leasehold Reform, Housing and Urban Development Act 1993. You can still extend your lease up to 90 years on top of the remaining term of your lease. 

Alternatively, you could staircase to 100% and acquire the freehold of the property. You would then own the property outright as the freeholder and your lease would no longer exist. 

Please note that some shared ownership houses are restricted to 80% ownership, which means that it is not possible to staircase to 100% and obtain the freehold. Please refer to your lease or speak to the Home Ownership Team if you need further clarification on this. 

I live in a shared ownership flat - what are my options?