13 commonly asked questions and answers about residential lease extensions in England and Wales
1. What is a residential lease extension?
A residential lease extension is a legal process that allows a leaseholder to extend the lease of their property, typically by 90 years for flats and 50 years for houses. This provides greater security and value to the property.
2. Who is eligible to apply for a lease extension?
Leaseholders who have owned their property for at least two years are eligible to apply for a lease extension. If the property is being sold, the right to extend can be passed on to the purchasers provided the current owner serves a Section 42 Notice of Claim.
3. How is the lease extension premium calculated?
The premium for a lease extension is calculated based on various factors, including the property’s value, the length of the lease, and the ground rent. It is advisable to seek professional valuation advice to determine the exact cost.
4. Can I negotiate the premium payable for a lease extension with my landlord?
Yes, leaseholders and landlords can negotiate the terms of the lease extension, such as the premium and lease length. This is done through your surveyor.
5. How do I start the lease extension process?
To start the process, you need to obtain valuation advice from a qualified surveyor on the premium payable and then instruct a specialist solicitor to serve a Section 42 Notice of Claim on your landlord. extensions to help you with this notice.
6. What is the role of the landlord in the lease extension process?
The landlord has the right to respond to the Section 42 Notice and can either agree to the premium and terms or contest them. They have two months to respond and cannot deny the leaseholder the right to extend their lease.
7. How long does the lease extension process typically take?
The process can vary, but it usually takes several months to a year or more to complete. Delays can occur due to negotiations over the premium payable and new lease terms.
8. Can I extend my lease if it has fallen below 80 years?
Yes, although it’s advisable to extend your lease before it falls below 80 years. You can still extend if it is below 80 years, but the cost of extending the lease can increase significantly due to the marriage value.
9. What is the marriage value, and how does it affect the lease extension cost?
Marriage value is the increase in the property’s value resulting from a lease extension. When the lease has fallen below 80 years, the landlord is entitled to 50% of the marriage value, which can substantially increase the premium; often thousands or tens of thousands of pounds.
10. Can I extend a lease on a leasehold house?
Yes, leaseholders of houses in England and Wales can apply for a lease extension, typically adding 50 years to their existing lease. However, in many cases it is better to acquire the freehold under the Leasehold Reform Act 1967.
11. Are there any tax implications for lease extensions?
Generally, lease extensions do not attract Stamp Duty Land Tax (SDLT); provided the premium payable is below £40,000. Above this level Stamp Duty is payable. Other tax implications may apply, particularly for second homeowners, therefore we recommend seeking professional advice from a specialist accountant.
12. What is the difference between a Red Book Valuation and a lease extension?
A lease extension valuation is not a Red Book Valuation. However, there is some difference of opinion here. Our view is that it is a statutory valuation under the ’93 Act, however principals of the Red Book apply e.g. Market Value.
13. Can I sell my property with a short lease? Can I get a mortgage?
Selling a property with a short lease can be challenging. Most buyers prefer properties with longer leases, so extending your lease before selling can make your property more attractive to potential buyers and increase its value. Many banks and lenders will not lend on flats with leases less than 80 years and or have much stricter criteria if they do.
Please note that lease extension rules and regulations may change over time, so it’s essential to consult with legal professionals or government sources for the most up-to-date information and guidance on lease extensions in England and Wales.
If you would like to discuss something related to a property valuation, please contact me direct via email at zah@scrivenertibbatts.co.uk or call 020 8947 7040.
