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Safeguarding Your Investment by Extending Your Lease
4 June, 2024 3 minutes reading time
Leasehold properties are a common form of home ownership in the UK, especially for flats and apartments. However, a lease has a fixed term, and as this term gets shorter, the property’s value may decrease. This is where lease extensions come into play, allowing leaseholders to extend their ownership rights and safeguard their investments.
Benefits of Extending Your Lease
Extending your lease isn’t just about legal mumbo jumbo. There are several compelling reasons to consider extending your lease. Those at the top of the list include:
- Maintaining your property’s value. As the remaining lease term shortens, the property’s value can decrease significantly. Extending the lease can help maintain or even increase the property’s market value.
- Securing a mortgage or remortgage. Lenders get nervous about short leases. Extending yours gives you more options when you need a mortgage or want to remortgage with better terms.
- Gaining peace of mind. Knowing you’ve got a long lease means you can relax and enjoy your home without worrying about time running out.
Legal Framework for Lease Extensions
The Leasehold Reform, Housing and Urban Development Act 1993 provides leaseholders of flats with the statutory right to extend their lease by 90 years, provided they meet specific criteria. The main criteria include:
- Qualifying Tenant. The leaseholder must have owned the property for at least two years.
- Long Lease. The original lease must have been granted for a term of more than 21 years.
Informal vs. Formal Options
There are two main routes to extending a lease:
- Informal Lease Extension. This method involves direct negotiation with the freeholder (landlord) to agree on the lease extension terms. If both parties are willing to cooperate, this can be a faster and more cost-effective option.
- Formal Lease Extension. If an agreement cannot be reached informally, the leaseholder can serve a formal notice on the freeholder to initiate the statutory lease extension process. This process is more regulated and involves a formal valuation to determine the premium payable.
The Lease Extension Process
Extending your lease can seem complicated, so getting advice from a legal professional who knows leasehold law is a good idea. Here are the basic steps:
- Initial Valuation. A valuation determines the premium payable to the freeholder for the lease extension.
- Serve Notice. The leaseholder serves a formal notice on the freeholder stating their intention to extend the lease.
- Negotiation (if applicable). If an informal agreement is possible, negotiations take place to finalise the terms.
- Valuation (if applicable). If an informal agreement is not reached, a formal valuation is conducted.
- Lease Extension Granted. Once the premium is agreed upon or determined, the lease extension is granted, and the lease is extended by 90 years.
Our Advice
Extending your lease on a leasehold property in the UK is a crucial step in protecting your investment, securing a mortgage, and ensuring peace of mind. Our property team can guide you through the process, explain the legalese in plain English, and ensure you get the best deal possible. If you want to extend your lease or need advice about any property matter, please don’t hesitate to contact us. We’re here to help.
Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.