Lease Extensions Explained: When, Why, and How to Do It Right

When Should You Extend Your Lease?

The most opportune time to get the ball rolling with your lease extension is before the 80-year mark. Once your lease dips below this threshold, things start getting a bit more costly because of the “marriage value.” The law recognises the increase in the property’s value after a successful lease extension, so the leaseholders will likely have to share some of that benefit with the freeholder, which is not ideal.

When considering extending your lease, the sweet spot is when you still have a good chunk of time left on it, let’s say between 85 and 90 years. Taking steps to act before your lease hits the 80-year mark can save you considerable money in the long run.

It can help to keep an eye out for the tell-tale signs, too. If you are thinking of moving home and finding it tricky to sell up or remortgage, or if your landlord starts talking about bumping up the ground rent because your lease is shrinking, these are clear indicators that it is a good time to take steps towards securing a lease extension. Getting ahead of the curve does pay dividends.

Why Extending Your Lease is Important

Let’s look deeper into why extending your lease is so important and makes so much sense. For starters, the length of your remaining lease will directly impact the value of your property. As the years tick by and your lease gets shorter, potential buyers can get a bit wary, and this can knock down the asking price. It is all about marketability, you see.

Then, it is important to consider the mortgage aspect. Most lenders set their own rules about granting mortgages for leasehold properties, and most will shy away from lending against a property with less than 70 or 80 years left on the lease. This can make selling or even remortgaging a leasehold property problematic.

If your lease is nearing the 80-year threshold, putting off organising a lease extension is simply delaying the inevitable and will likely cost you more money further down the line. As mentioned earlier, that “marriage value” kicks in below 80 years, adding to the bill. Finally, for many leaseholders, extending also means a chance to wave goodbye to those often escalating ground rents, with extensions often taking the lease up to a whopping 999 years – which is a pretty reassuring thought!

How to Extend Your Lease – Step-by-Step Guide

It might sound a bit daunting, but breaking the process down step by step makes it much more straightforward.

Step One: First, before you do anything else, you must check if you are eligible. Fortunately for leaseholders, the Leasehold and Freehold Reform Act 2024 is now in the statute books, although the full benefits are being rolled out in stages. As of February 2025, the government has made it easier to get started by scrapping the two-year ownership requirement for lease extensions, and they have widened the net for leaseholders in mixed-use buildings wanting to manage their properties. Plus, there are now limits on the costs you can be asked to cover.

Step Two: The next step is to get a professional valuation. A specialist lease extension surveyor can assess the fair price, or ‘premium, you should expect to pay.

Step Three: Following the professional evaluation, you must serve a formal legal notice – known as a Section 42 notice – to your freeholder, officially stating your intention to extend.

Step Four: The freeholder then has a couple of months to respond, and this is where the negotiations on the terms of the new lease begin.

Step Five: Finally, once you have reached an agreement, your solicitors will handle all the legal bits, drawing up the contracts and registering your new, longer lease with the Land Registry.

Securing a new lease for your property is a process with distinct stages, and getting expert advice at each point is key to ensuring a smooth journey. Looking ahead, further reforms are on the horizon that promise to make extending your lease and buying your freehold simpler and, for many, more affordable. The standard lease extension is jumping to a whopping 990 years!

Even more excitingly, the government has released news about its plans to ban the sale of new leasehold flats and breathe new life into commonhold with a fresh legal framework. Keep your eyes peeled for the draft Leasehold and Commonhold Reform Bill later this year, which will reveal the finer details of these game-changing proposals. This is a period of significant change that could really benefit leasehold property owners.

How Much Does a Lease Extension Cost?

You may wonder what the damage will be to your wallet when paying for a new lease extension. The answer isn’t black and white because several factors affect the overall cost. The value of your property, the number of years remaining on your current lease, and the ground rent you are paying all significantly impact the cost.

Let’s not forget the “marriage value” in all of this. As we mentioned earlier, once your lease dips below that critical 80-year mark, the freeholder becomes entitled to a slice—typically 50%—of the increase in your property’s value that the lease extension will create. This can really bump up the cost, and this is why we emphasised earlier how important it is to act sooner rather than later when securing an extension.

In addition to the main cost of the extended lease itself (known as the premium), you will also need to factor in fees for your surveyor, your solicitor, and, rather frustratingly, the reasonable legal and valuation costs incurred by your freeholder. It is worth getting a clear picture of all these potential outlays so you can budget effectively and know what the lease extension will cost.

Alternatives to a Formal Lease Extension

While following the formal lease extension process is the most common route, you might wonder if there are any other options you could pursue. One possibility is trying to negotiate an informal extension directly with your freeholder.

In some cases, this could be a much quicker way to proceed and secure the extension you want, but it is crucial to understand the potential downsides. Unlike the statutory route, an informal agreement lacks the same legal protections, and you could inadvertently agree to terms that are not in your best interest—such as keeping a high or escalating ground rent.

Another alternative, particularly if your property is in a block of flats with other leaseholders, is collectively purchasing the freehold with your fellow leaseholders. Doing this will give all the leaseholders involved better long-term control over the building and will completely remove the need for lease extensions.

However, choosing this route will be a more challenging journey, requiring the agreement and cooperation of multiple leaseholders and significant upfront legal costs. While these alternatives exist, it is worth weighing up the potential speed and perceived simplicity against the more secure legal protection and standardised terms offered by the formal statutory process. Remember that pursuing the informal route without having expert legal advice and assistance to back you up can be a legal minefield. It could prove to be a false economy.

Conclusion

To wrap things up, for any leaseholders in the UK with a shrinking lease length, it is clear that getting your lease extended, particularly before it dips below that crucial 80-year mark, is a really smart move.

Taking action early can save you considerable money and hassle. A healthy lease length is essential for a homeowner looking to secure their asset, a landlord ensuring a property remains attractive to tenants, or an investor focused on long-term value.

For current leaseholders, the process of securing a new lease can feel overwhelming, especially when doing it alone. At Crown Luxury Homes, we have guided many leasehold property owners through every stage of the process. From getting an accurate valuation and handling those all-important negotiations to ensuring all the legal boxes are ticked, our team is here to provide the expert advice you need.

If your lease is running down and you are considering an extension, please contact us at Crown Luxury Homes. We are dedicated to helping you secure the best terms for your lease extension.