If you are a tenant or landlord, you may be interested in a lease extension on your property. The process can often be daunting without any legal help or advice.
The legal jargon for both tenants and landlords when it comes to lease extensions is overwhelming. At Talbots Law, we cut through this and give you all the information you need to make the process as easy as possible.
What is a Lease Extension?
A lease extension is a legal document to agree to extent a property lease. There are different types of lease extensions, however, most boil down to either landlord or tenant lease extensions.
The shorter the remaining term on a lease, the more complex it can be to extend. In particular, once a lease falls below 80 years, both landlords and tenants can face additional challenges.
At this stage, the property may become less attractive to potential buyers and more difficult to finance, as mortgage lenders often impose stricter requirements on shorter lease terms.
For this reason, it is generally advisable to consider extending a lease before it drops below the 80-year threshold, as extension costs can also increase once this point is reached.
The Lease Extension Process
Step 1: Valuation
This valuation will determine how much a lease extension will cost, taking in many factors such as current lease length, property value and ground rent. A surveyor will conduct the valuation.
Step 2: Section 42 Notice
Leaseholders need to inform the landlords that they are intending to extend the lease, including information on the terms and costs. This is a legal document and is a proposal to initiate the process. Our team of experts at Talbots Law can help you draft this Section 42 notice.
Step 3: Response
Landlords have two months to respond to the Section 42 Notice with a counter offer. This is where legal teams can help with negotiating the terms and proposing a deal that both parties are happy with.
How Long Does the Lease Extension Process Take?
The lease extension process can take between 3 and 12 months, depending on agreement or disagreement of terms. If an initial lease extension proposal is disputed, then it may go to a tribunal that can lengthen the overall extension process.
There are also variables that cannot be controlled, such as the surveyors’ turn around time and responses from both parties, that may increase the timeframe.
How Much Does a Lease Extension Cost?
The cost of a lease extension depends on multiple variables, such as the current property value, how long is left on the current lease, ground rent and any property improvements that the leaseholder has incurred.
There isn’t a one size fits all cost for a lease extension, it can vary and often can be taken to tribunals to get the cost finalised.
There are factors that also increase the cost when extending your lease, this includes:
- Paying for a solicitor for legal advice
- A surveyor conducting the valuation
- Land registry fees
If you want a round-about figure on the price of lease extensions, it’s best to contact an expert on the matter or use our lease extension calculator tool.
How Can I Keep Lease Extension Costs Down?
There are several things you can do to keep lease extension costs down, including extending your lease as early as possible to help avoid paying over the odds for a current lease that’s lower than 80 years.
Make sure to choose the correct solicitor to advise you on your lease extension and choose a specialist surveyor who will make sure to give you a quality, accurate valuation.
What Happens if I Don’t Extend My Lease?
If you delay extending your lease, you may incur heavier costs than expected, and this applies for both tenants and owners. As time passes on extending the lease, the cost of the extension will also increase and the property will become harder to sell.
When selling your property, most buyers look for longer leases as it will incur less cost and complications later down the line. Landlords may find that they can incur financial losses and disputes with tenants if they won’t increase leases.
Do I Meet the Criteria for a Lease Extension?
There are certain criteria you must meet when applying to extend your lease. This criteria includes:
- The lease must not be a business or a commerce.
- You must have owned a leasehold property for two years or more.
- The lease must not have been granted in the course of charity.
- The leasehold you own must be considered a ‘long lease’, this means an original term of over 21 years.
Call us on 0800 118 1500 or complete the form below
If you’re still unsure of the information around lease extension and its process, then speak to our dedicated team at Talbots Law.
At Talbots Law, our Corporate & Commercial Team specialises in Lease Extensions. We can review your documents, help you plan for your lease extension, and ensure you’re following the right processes.
Contact us today on 0800 118 1500 or get in touch online to arrange a consultation. Let us help you understand the process and make sure your agreements work for you when it matters most.
This blog was written by Daniel Malin, Associate & Marketing Manager, Sales & Marketing Team. The contents of this blog, or any other published by Talbots Law, cannot be considered as legal advice so you should take no action without prior consultation with a qualified solicitor or legal professional. The contents of this blog refers to the process in England and Wales.