How Much Does It Cost to Extend A Lease?

What are the lease administration fees and who do I pay? 

When you buy, own or sell a leasehold property, many of your rights and obligations will be set out in your lease. One of your obligations may be to make certain payments to the person or the organisation responsible for managing your building. That person – the lease administrator – might be your landlord, a management company or a managing agent instructed by the landlord.

How can I find out how many years are left on the lease?

If you’re considering buying a leasehold property, then the very first thing you should do is check how much of the lease is left to run. The first few pages of your lease document should show how many years are left on your leasehold and help you find out when the lease started. It should say the date of the lease, the length of the lease term and the date that lease term started.

If you don’t have a copy of your lease you might be able to get one from your solicitor or mortgage lender, or you can order one from the Land Registry by post or online.


Licence to assign fees

Some leases, but by no means all, contain a provision that require an outgoing tenant to obtain their freeholder’s consent to them selling their lease.  This “Licence to Assign” will generally be produced by the freeholder’s solicitor who, you guessed it, will charge for producing the licence which will eventually need to be signed by the seller, the freeholder and the buyer.

Licence to assign fees can be as much as £750, and of course will be subject to VAT (which few individual purchasers can reclaim).

Because it is the seller that is obliged to obtain their freeholder’s consent, it is usually the seller that ends up paying for the cost of obtaining it.

Why does Hawaii have leasehold estates? How many leasehold Hawaii properties exist on Oahu now?

Leasehold Hawaii properties date back to the early 1800s when all the land in Hawaii belonged to one owner – King Kamehameha III. The Great Mahele of 1848 divided all the King’s land into ownership under three main groups: the Konohiki (headmen of the ahupua‘a, or land divisions), the King, and the Royal Government. 

The Great Mahele made possession of land possible instead of the traditional Hawaiian ahupua‘a system. However, owners of the land would have to present claims to the Land Commission to secure title ownership to property – an often-difficult process that took many years. Therefore, much of the Konohiki land was sold and managed by trusts like the Queen Emma Foundation, Liliuokalani Trust, and Bishop Estates. These trusts would then lease the lands; thus Hawaii had many leasehold properties historically. 

Today, the majority of single-family homes have converted to fee simple properties, with only 2 percent of homes on the Oahu market being leasehold. According to the Honolulu Board of Realtors, an average of about 10 percent of condos on the Oahu market are leasehold properties, many of which are found in Waikiki, Downtown, Makiki, and the University area with a few in Pearl City, Kahala, and Windward Oahu.

Conclusions & summary

  • As a leaseholder you need to know how many years remain on your lease because once it drops below 80 years, it becomes considerably more expensive to extend.
  • When purchasing leasehold property, you may feel more secure looking at those with leases of at least 83 years, as you do not have the right to extend the leasehold until you have owned it for two years, and the process of extending the lease can be quite lengthy.
  • Make sure you are aware of your rights as a leaseholder, which include the right to extend your lease by 90 years for a reasonable market fee, and the right to purchase part of the freehold under certain conditions.

How to Keep Your Lease Extension Costs Down

Here are a few top tips to help keep the cost of extending your lease down:

  1. Make sure you begin the process before your lease falls to 80 years. After this, you will have to pay the freeholder an extra cost called ‘marriage value’ which means a lease extension will get progressively more expensive.
  2. Appoint both a specialist surveyor and specialist solicitor. Scrimping on professional costs could result in you paying over the odds for your lease extension.
  3. Steer clear of informal lease extensions. Your freeholder may offer an informal lease extension rather than one following the Leasehold Reform Act rules. But an informal lease extension doesn’t necessarily add 90 years to your lease or reduce your ground rent to zero. An unscrupulous freeholder may use an informal lease extension to increase ground rent, making the property difficult to sell in the future.

What is a leasehold property?

Leasehold is rather different from freehold. You effectively lease ownership of a property for a specific period. This tends to be over a lengthy period, but can vary from anywhere between 40 to 999 years. However, as a guide this is often 90 or 120 years.

You will have a contract with the freeholder of your property, which sets out precisely what you are responsible for. You will likely be required to pay certain annual costs, such as ground rent, while you will also be required to contribute towards maintenance and service charges.

Generally, you will need to get permission from the freeholder to carry out any major works to the property, while there may also be limitations on things like keeping pets.

Should the lease expire, then the full ownership of the property will revert to the freeholder.

Leasehold is usually reserved for flats and apartments, but this has not always been the case. Many older properties in England, Wales and Northern Ireland are on leaseholds and, in recent years, there have been a number of new-build homes sold in this way. In 2019, the UK government banned this practice, ensuring that all new-build homes are sold as freehold.

Can you extend a lease?

You can apply to your landlord to extend a lease at any time. If you qualify you may be able to extend your lease on a flat by up to 90 years or by 50 years for a leasehold house.

The cost of extending a lease varies and is usually made up of two parts:

  • The premium: the agreed price for extending the lease.
  • Fees and taxes: this includes the cost of hiring professionals and taxes that may apply.

Using the Leasehold Advisory Service’s (LAS) lease extension calculator can give you an estimate of how much extending your lease will cost.

Should I buy a leasehold house?

Whether or not you buy a leasehold or freehold property will largely depend on availability and your financial circumstances.

If you are considering a leasehold property, it’s important to be aware of additional fees you’ll need to cover such as ground rent and services charges. Depending on the terms of your lease, the freeholder may increase these fees every few years, making them significantly more expensive in the future. Similarly to mortgage payments, your home may be repossessed if you can’t cover the cost of your ground rent.

It’s also vital to check how long is left on the lease. It may be difficult to get a mortgage for a property with a lease of less than 80 years. And a lease of fewer than 70 years can severely affect the value of the property.

The cost of extending a lease can be expensive, so it’s something to think about before buying a leasehold property. In some cases, you may be able to use a short lease to negotiate a lower price for the property or to get the seller to cover the cost of renewing the lease themselves at their current asking price.

You should also check the terms of your lease to avoid any surprises – for example, if there is a ban on having pets or restrictions on home improvements.

How can we help

We’re here to give you straight-talking expert advice on:

  1. What is the best way to sell your house.
  2. How to find estate agents you can trust.
  3. How to pocket more money when you sell.

How Do You Extend Your Lease?

The 1993 Leasehold Reform Act sets out the statutory process for extending a lease. The act gives a qualifying leaseholder the right to be granted a new lease for an additional 90 years from the expiry of their current lease. If 80 years are left to go, a new lease of 170 years (90 plus 80) can be granted in substitution for the existing lease

To qualify you need to have owned the property for at least two years and the lease must have been for more than 21 years when initially granted. Once a lease is extended under the Leasehold Reform Act, there will be no more ground rent to pay on the property.

5 steps to extending a lease

  1. The first step in extending a lease is to get a specialist surveyor to do a valuation. This involves a complex set of calculations. The surveyor will look at the current length of the lease, the property’s location, ground rent, terms in the lease, and the value of the flat with and without the lease extension.
  2. The surveyor will then suggest an opening offer to the freeholder. You’ll use this figure to serve a section 42 ‘Tenant’s Notice’ notice on the freeholder.
  3. The section 42 notice triggers a timetable under which the freeholder has at least two months in which to respond and serve their own notice – the landlord`s counter notice or section 45 notice. This will include the freeholder’s opening offer. Don’t be surprised if this figure is twice your offer –your surveyor will then negotiate with the landlord’s surveyor to get a price both sides agree on.
  4. If you can’t agree a price within two months you can make an application to the Leasehold Valuation Tribunal (LVT). The LVT can make a ruling on what is a fair price for the lease extension but it’s an expensive process.
  5. Once a price is agreed you’ll need a solicitor to do the necessary paperwork and draw up a new lease. Once it’s been signed by both parties your conveyancing solicitor will register the new lease with the Land Registry.

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Wider issues with service charges

Problems with cladding have also highlighted wider issues with service charges. Well-drafted, these provisions should ensure all leaseholders in a building contribute to the cost of maintaining shared facilities. They should set out clearly which services the landlord must provide, and the mechanism for funding and delivery should be fair and reasonable.

Some leaseholders feel they do not have enough say over the services they receive and are unhappy with cost and quality. There is already some legal protection in place for leasehold owners, who have the right to challenge unreasonable costs. However, in practice, this can prove a time-consuming and expensive exercise, especially if it becomes necessary to repeat it.

Conversely, in many leasehold developments the service charge provisions work well. For example, leaseholders may take an active role in management through a company they control. When viewing a leasehold property, ask about the management of common parts and service charges. It is easier to avoid buying into potential problems than to have to resort to your legal rights to sort them out later. Your solicitor should investigate any potential service charge disputes as part of their pre-contract enquiries, so you should not be caught out.

Indeed, as your solicitor, we would look carefully at how the service charge provisions work overall. As well as clarifying the amounts, we would check the seller’s payments are up to date and correctly apportioned on completion.

Ideally, the service charge should spread the costs evenly over time, so all leaseholders contribute based on their period of usage, not just when an item of expenditure arises. Under-provision in the past could mean disproportionately large increases later. For example, replacing a capital item, such as a roof or service lift, can be expensive. The landlord should have apportioned the cost over the item’s lifetime and collected this through the service charge on a rolling basis from all the flat owners, past and present, who have benefitted. This way, there should be a pre-existing fund for its replacement. However, if there are insufficient reserves, then you and the other current owners may have to make up any shortfall or pay for the replacement.

So, we would also ask about planned expenditure and the building’s maintenance. You could then form a more accurate view of the likely costs in the future.

What does freehold mean?

If you buy a property freehold, it means you completely own the property and the land it sits on (though of course your mortgage company could still repossess it if you don’t keep up repayments). This kind of total ownership is known as ‘title absolute’ and sometimes by the curious term ‘fee simple’.

You are responsible for all costs relating to the property, e.g. repairs and buildings insurance. Usually there are no maintenance charges, unless you share any services (such as communal gardens) with your neighbours.

Most houses are freehold (but do check this). With some flats, you may be able to share the freehold with your neighbours as part of a management company.

Leasehold has Risks

Purchasing leasehold properties has risks.  Make sure you understand the lease terms clearly before moving ahead.  Even leases with long terms often have renegotiation dates which can interfere with financing.  For example, if there is a renegotiation date within 5 years of purchase, the lender may use an estimated renegotiated lease rate to qualify the buyer.  Lease rents are added to the loan payment when determining if the buyer qualifies for a loan.  The higher estimated renegotiated rate may be too high for the buyer to qualify for the loan – even though they can qualify at the current lease rent amount.   

Leasehold can also be difficult to re-sell.  Unlike Fee Simple properties, leasehold properties often lose value over time.  Why?  The term of the lease gets shorter.  This can make re-selling the property difficult.

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