Lease Extension Valuations:
Lease Extensions Explained
Your Right to Extend Your Lease and Protect Your Investment
Under the Leasehold Reform, Housing and Urban Development Act 1993 (commonly known as the 1993 Act), qualifying leaseholders are legally entitled to extend their lease by an additional 90 years, on top of the remaining lease term. This extension comes with the added benefit of a peppercorn rent, meaning you will no longer pay any ground rent once the lease is extended.
For example, if your current lease has 70 years remaining, a successful lease extension under the 1993 Act will increase the lease length to 160 years, significantly enhancing the value and saleability of your property.
Can I Extend My Lease?
If you’ve owned your flat for at least two years (a requirement that may be subject to future reform), you currently have a statutory right to extend your lease by 90 years. This is particularly important if your lease is approaching, or has dropped below, 85 years, as shorter leases can negatively affect the property’s market value and mortgageability.
If you’re buying a flat with a short lease, it’s worth noting that if the current owner has held the property for two years, they can initiate the lease extension process before selling to you. This can help you avoid the two-year ownership requirement and secure the extended lease from day one.
Why Extend Your Lease?
- Increase Property Value: Flats with short leases often sell at a significant discount. Extending your lease can restore full market value and widen your pool of potential buyers.
- Ease of Sale and Mortgageability: Properties with longer leases are more attractive to buyers and mortgage lenders.
- Ground Rent Elimination: Extending your lease under the 1993 Act reduces your ground rent to zero, offering long-term financial savings.
The longer you wait to extend, the more expensive it can become, especially when your lease drops below 80 years, triggering marriage value, which can increase the premium payable to your freeholder.
How Nebula Chartered Surveyors Can Help
At Nebula Chartered Surveyors, we offer expert advice and guidance throughout the lease extension process. Our RICS-registered valuers can:
- Provide an accurate valuation to determine a fair premium payable for your statutory lease extension.
- Advise you on the negotiation process with your freeholder.
- Collaborate with your solicitor to ensure the legal notice is correctly served under the 1993 Act.
- Support you through any negotiations or tribunal proceedings, should a dispute arise over the premium.
We can also combine your lease extension valuation with a Level 2 or Level 3 Home Survey, often at a discounted rate if you’re buying a flat with a short lease.
The Process at a Glance
- Check Eligibility: You must have owned the flat for two years.
- Valuation: We calculate the premium based on the freeholder’s loss of interest, marriage value (if applicable), and other relevant factors.
- Serve Notice: Your solicitor serves the Initial Notice on the freeholder to start the statutory process.
- Negotiation: Agree on the premium or proceed to the First-tier Tribunal if terms can’t be agreed.
- Complete the Lease Extension: Once agreed, your solicitor finalises the new lease and registers it with the Land Registry.
