Lease Extension FAQ: Costs, Marriage Value, Timescales and Who Qualifies

The Questions We Get Asked Most

The most common thing people tell me on a first call is “I’ve spent weeks looking into this and I’m still totally lost.” Lease extensions are not rocket science, but few people specialise in them, so straight answers are harder to find than they should be. We only do lease extensions, and we do more of them in a month than 99.9% of firms do in a year. These are the questions we hear most, with as little jargon as I can manage.

What is a leasehold property?

In England and Wales you own a property either freehold or leasehold. Freehold means you own the building and the land forever, as with most houses.

Flats are different because a freehold is very hard to split vertically. One party owns the freehold, and everyone else in the building gets a lease: a legal right to live in their part of the building for a set number of years. A leasehold flat is a prepaid rental contract with an expiry date. Instead of renting for 12 months, you have prepaid for, say, 125 years.

Every day that lease gets shorter, and the flat becomes less valuable, harder to sell and harder to mortgage. If it runs out and you have done nothing about it, the property goes back to whoever owns the land, even if you have paid off your mortgage and lived there for 40 years.

What is a lease extension?

A lease extension is a statutory right under the Leasehold Reform, Housing and Urban Development Act 1993, so your freeholder cannot say no. There are a handful of small exceptions, covered below, but there is nearly always a way to extend.

It adds 90 years to whatever you have left, so 60 years becomes 150. It also reduces your ground rent to a peppercorn, a single grain of pepper that keeps the contract valid. Nobody comes round to collect it, so in reality your ground rent goes to £0. Together, those changes make the property more valuable, easier to sell and easier to mortgage. See what the ground rent cap means for leaseholders.

Why does lease length matter so much?

Your lease works like a sand timer, with value falling from your side to the freeholder’s, and it speeds up as it runs down. At 150 years your flat is at full value. At 100 years it is at about 98 to 99%, and at 80 years about 85%. Below 50 years you lose about 1% of the property’s value every year, and faster the further you go.

Then there are mortgages. Based on the UK Finance Lenders’ Handbook, lenders generally start having issues around 90 years, and by 50 years no mainstream lender will touch it. The rule of thumb is that if the lease will have less than 50 years left when the mortgage ends, you will struggle. A 75-year lease with a 30-year mortgage takes you down to 45 years, where most lenders say no.

Lenders also generally do not accept ground rent above about 0.1% of the property’s value (about £300 a year on a £300,000 flat), and they are cautious of ground rent that doubles or is tied to RPI.

Short leases also tend to sit on the market longer and sell for less. Our data shows no real impact on time to sell at around 120 to 130 years, but below that, the shorter the lease, the harder the sale.

What is marriage value?

Marriage value is probably the biggest trap in the whole process. It applies from the day your lease drops below 80 years, and it is a cliff edge. Going from 80 years to 79 years and 364 days can add tens of thousands of pounds overnight.

The law says you must share 50% of the increase in value from extending with the freeholder. Some freeholders know exactly how this works, and if you are close to 80 years they may slow things down with informal offers or third-party arrangements to push you into marriage value, because that puts significantly more money in their pocket.

If you are not in marriage value yet, acting sooner is nearly always better than waiting. Even if you are hoping reforms will reduce the cost, you are probably still better off extending now.

What does a lease extension cost?

Most people only think about the premium, but there are five costs to budget for.

1. The premium you pay the freeholder. It follows a formula set out in law, so they cannot make up a number. But the process is adversarial, and every penny goes into their pocket, so they will push it as high as they can.
2. The freeholder’s reasonable costs, typically £2,000 to £4,000. These have been rising, and we have seen freeholders try to charge £6,000 on a £5,000 premium. You can challenge excessive costs at tribunal, but that normally costs more than you would save.
3. Your own costs. Budget £2,000 to £4,500 for a specialist solicitor and valuer. You want someone who has done hundreds of these, because a mistake can be written into your lease forever. See how to choose a solicitor.
4. Stamp duty, only if your premium is above £40,000, when you must file a return. If you own another property or are not UK tax resident, you might have to pay tax from that point.
5. Court or tribunal. This happens in about 5% of our cases and typically costs £5,000 to £10,000.

Do I qualify?

For most flat owners, yes. There are three requirements:

• The original lease must have been granted for at least 21 years. Leases of 99 or 125 years are the norm, so nearly every lease meets this.
• The property must be a flat or maisonette. Leasehold houses fall under different, more complicated legislation, and their owners are generally better off buying the freehold.
• You cannot be in breach of your lease. Unauthorised alterations, or arrears of ground rent or service charge, need sorting first, or the freeholder can refuse the extension right at the end.

The old two-year ownership rule has been scrapped, so you can start as soon as you own the property. You also do not need your mortgage lender’s permission for a statutory extension, which you would for an informal one. Compare formal and informal lease extensions.

Shared ownership often trips people up. You need to own 100% before you have the statutory right. Otherwise you could own 50% but pay 100% of the costs under an informal arrangement, so you are typically better off staircasing to 100% first. Read our shared ownership guide.

How long does it take?

Up to 12 months if it goes the distance, though most of our cases complete in 6 to 9 months. The freeholder has 2 months to respond to your notice, then there are 6 months to agree terms and 4 months to complete. Court or tribunal can add 12 months, and a missing landlord case could take three years.

Serving the initial Section 42 notice freezes the valuation date, so if you are close to 80 years, getting that notice served in time is everything. We had a client two days away from marriage value, and I cycled across London to serve notice on every party in person, because missing it would have cost them tens of thousands.

How do I pay for it?

This is probably the most common problem we see. People know an extension adds more value than it costs, but they do not have tens of thousands of pounds down the back of the sofa. You need to extend to sell or remortgage, but you need to sell or remortgage to pay for the extension.

Doing both at once is like trying to land two planes on the same runway. If either timeline slips, you could be forced to withdraw from the extension, wait a year and still pay the costs, or lose your buyer.

Lenders often will not release a personal loan or remortgage until the extension completes. Our lease extension finance can fund the entire cost up front, and you pay us back once you have sold or remortgaged.

Get Your Free Lease Report

Online calculators can give a very rough estimate, but they rest on so many assumptions that they are of little use. If you want to see the numbers for your own flat, our free lease report shows whether you are close to the 80-year mark, what your all-in costs might be and how you could pay. Put in a few details and our team will put it together for you.

Get your free lease report