With leasehold reform coming in the next few years (estimated on April 1, 2023) many people are debating whether now is the right time to extend their lease. Everyone’s situation is different, and while the provisions stated on the reform bill are promising, not everyone has the luxury to wait it out. Despite the fact that extending your lease will become so much easier in just a few years, it’s still best to understand the process.
Extending your lease can be a long and complicated process. But with some patience and dedication, it shouldn’t be too stressful. It happens all too often that people start the process too late. Time can either be your friend or your enemy when it comes to negotiations. You also need time to find some alternatives in the market to give you an opportunity to create leverage.
All that said, in this article, we will discuss everything you need to know about extending your lease.
A Step-By-Step Guide
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Step 1
First and foremost, you should inform the freeholder of your interest or desire to extend the lease. When you lease an apartment or a property, you are the leasehold, and you have the right to occupy that space.
However, the freeholder still owns that property outright as a landlord. You also need to inform the freeholder if you plan on pursuing the statutory route. This means that if you’ve owned the property for at least two years, you have the right to add 90 years to your lease at no ground rent.
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Step 2
Hiring a lease extension solicitor is not just a recommendation. It’s a necessity. Unless you’re an experienced extension solicitor yourself, you’re going to need their help and expertise to navigate your lease extension efficiently. The solicitor you hire should be experienced and a member of the Association of Lease Extension Practitioners (ALEP).
It’s essential that you have someone to guide you through the process while also looking for alternatives to get quotes and compare costs. As mentioned above, negotiating with your freeholder will play a significant role in your lease extension. So, someone who has experience and background in this field will give you invaluable help.
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Step 3
Find a valuation surveyor. A valuation surveyor is someone who estimates the worth of something. A surveyor carries out valuations on residential, commercial, or industrial properties. This helps them to organise the sale or rent of the property. Their expertise is vital to have a good grasp of the necessary investment, development, and management of properties.
Make sure that you hire some with expertise in leasehold extension legislation in particular. The surveyor should also have some experience and knowledge of the local property market.
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Step 4
Once you have everything sorted, aligned with the proper experts, and so on, you can finally make a formal offer to your freeholder. You will still have to serve a formal tenants’ notice to communicate and negotiate with the landlord. If you need help or assistance with this, rest assured that your solicitor can help you take care of this as well.
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Step 5
If all goes well, the next step should be to pay the deposit. This happens more on a case-by-case basis since it’s entirely up to the landlord whether or not they will require you to pay this.
The deposit can be £250 or 10 percent of the lease cost in the tenants’ notice, but that’s only if 10 per cent goes over £250. The deposit must be paid within 14 days, so make sure you have the amount ready well before submitting your notice.
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Step 6
After all is said and done, it’s finally time for negotiations to begin. This process is probably the most daunting and challenging of all the steps. This is also why it’s essential that you have a reliable and experienced solicitor with you. They can handle this whole part for you.
Typically, negotiations are only necessary when the freeholder doesn’t accept your offer. If after all the talks are finished, and neither party has agreed, you must move on to the next option.
You can apply to the First-tier Tribunal (Property Chamber). Note that once your cases go to the tribunal, you might be in for more trouble than it’s worth. So, make sure you discuss your options well with your solicitor and try your best to communicate with the landlord.
Commonly Asked Questions about Lease Extensions
—How Long Does the Process Take?
Every situation is different depending on so many factors. But on average, you’re looking at a 3 to 12-month process. Naturally, if you do everything alone, it’s bound to take all 12 months or even longer. There are a lot of things to consider and do.
Doing it alone is a valid choice, but it can be more troublesome than anything. With the help of expert valuers, solicitors, and other professionals, you can cut the process down much shorter. That’s why it’s important to choose the people you work with very carefully.
—How Can I Keep Costs Down?
Extending your lease can be complicated further because of the costs. Make sure to work smart and get proper help to ensure that you’re not wasting your time and money. You can keep your costs down by following these tips:
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Extend your lease as soon as possible—especially before the 80-year point when it becomes more expensive to buy up more years
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Appoint a specialist solicitor for the right legal advice
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Instruct an expert surveyor so you get the right valuation premium and don’t pay over the odds
—Should I Buy the Freehold or Extend the Lease?
Extending the lease gives you more time to reside in the house or apartment you’re currently in. However, it is worth considering buying the freehold so that you are able to own the property outright. Of course, if it were easy, everyone would do it.
Apart from the fact that most freeholders aren’t eager to part with their property, the process of buying the freehold is even longer and more complicated than extending the lease. You will be moving on to the conveyancing process. This involves more legal procedures and costs.
So, whether or not you should buy the freehold or extend the lease really depends on your commitment and love for the property. It will definitely take more time to complete the conveyancing process. Make sure you talk it over with your solicitor and valuer.
The Bottom Line
A lease extension is not so much a difficult process as it is long. There are more than a few factors at play, but an essential thing you must pay attention to is your relationship and interaction with the freeholder.
Out of all the steps, the most important one is Step 6: Negotiations. With the help of the right professionals, you can easily breeze through steps 1 through 5.
When you finally decide to extend your lease, just make sure to get a head start, even on your own. Weigh your options carefully whether or not you would like to extend your lease or buy the property outright.
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