If a property’s lease runs down to zero years, ownership usually returns to the freeholder. The leaseholder can lose the right to live in, sell or mortgage the property.
If you own a leasehold, make sure to extend it with a conveyancer before it drops below 80 years. If you are buying a leasehold property, the number of years left on the lease should be checked carefully before you commit.
Most people don't deal with leaseholds often, so it's easy to be unaware of how they work until it’s too late.
Put simply, as the lease shortens, the property loses value, becomes harder to sell, and securing a mortgage can be difficult and costly.
What is a Leasehold?
A leasehold is a type of property ownership where the buyer has the right to live in a home for a set period of time. Although the buyer has purchased the home, the building or land it sits on is owned by a freeholder.
As a result, leaseholders must pay fees to the freeholder in the form of ground rent. They may also be required to pay service charges, for example, for the upkeep of communal areas.
This was restricted for new leases in 2022 but ground rent still applies to pre-existing leases. The majority of leasehold properties are flats as these are usually units in a larger building where the land itself is owned by a freeholder.
What Happens If a Lease Runs Out?
If the leasehold expires, the property reverts to the freeholder. The leaseholder may lose the right to live in the property, sell it or use it as security for a mortgage.
Leaseholders may have the option to negotiate a lease renewal or to purchase the freehold. This depends on leasehold legislation, lease terms, and in some cases, the freeholder’s discretion.
In some cases, leaseholders may be entitled to compensation if they had made improvements to the property. This is subject to legal considerations and negotiations with the freeholder.
How to Find the Time Left on a Lease?
You can find out how long is left on your lease agreement from the Land Registry. These can be purchased for £3 per document from the Land Registry website.
When you own a leasehold property, it is strongly advised that you remain aware of the time left on the lease. Keeping track of this is essential to avoid a costly lease extension or the risk of the lease expiring.
If you are looking to buy a leasehold home, the estate agent should tell you how much time is left on the lease term. Additionally, your solicitor will flag if there is a short lease on a home you are purchasing during the conveyancing process. Details can be found in the Leasehold Property Enquiries (LPE1) which your conveyancer will provide you with.
Should I Buy a Property With a Short Lease?
Buying a property with a short lease is not recommended, as a shorter lease can negatively impact the value of the home. It may be harder to obtain a mortgage for the property, and the shorter the lease, the more expensive it is to extend it.
A lease should not drop below 82 years ideally, as you should leave enough time to extend the lease before it reaches the 80-year mark.
This is because once the lease falls below 80 years, marriage value will apply, which significantly increases extension costs.
Additionally, under current legislation, you must have owned the lease for the past two years.
You can extend a leasehold informally or via the formal route known as statutory lease extension.
Negotiated Lease Extension (Informal Route)
You can ask the freeholder if they are interested in negotiating a lease extension, but there is no obligation for them to consider this.
If they agree to negotiate but you cannot agree on the terms or the price, you can then opt for the formal route of a court order.
Statutory Lease Extension (Formal Route)
This route requires you to serve a formal notice to your landlord (the freeholder), outlining your claim and your terms. They will then reply with a counter-notice. This is either to agree to the term, propose new terms or not admit your claim. They can also not reply at all. If they can prove they are developing the building and the lease has less than 5 years, they can refuse the new lease entirely.
In the case that they do not admit your claim or do not reply, you can apply to the county court to renew the lease.
Which Route Should You Choose?
For most people, we strongly recommend the formal route as it provides greater legal protection and a fairer valuation process.
Unlike informal negotiations, the freeholder cannot impose unreasonable terms, and disputes can be settled through a tribunal if necessary.
Ultimately, the formal route is the safer option that can ultimately save you time and money.
How to Extend a Lease
1
Hire a Leasehold Solicitor
It is strongly recommended that you hire a specialist lease extension solicitor. They can provide crucial legal advice and guide you through the process.
2
Arrange a Valuation
The process begins with a valuation that must be carried out by a regulated surveyor. They will inspect the home and provide a market valuation of the property before the extension and its value once the extension is granted.
3
Solicitor Negotiations
Your solicitor can negotiate with the freeholder’s solicitor. If an agreement cannot be made, your solicitor will issue a Section 42 “Tenant’s Notice” to the freeholder. The freeholder will then have 2 months to respond to this notice.
4
Sign and Register the New Lease
Your solicitor will submit the appropriate documentation, including a new lease. This is then signed by both parties and the new lease will be registered with the Land Registry.
The lease extension process can take around 3 to 12 months. This will be longer if there are any delays, such as missing paperwork or unpaid fees.
According to Konnect You data, the average cost to extend a lease is approximately £5,967 plus your and the landlord’s “reasonable” professional costs. These include legal costs, lease extension valuation fees and other expenses.
Under current legislation, it is the leaseholder who covers the cost of the extension, including the expenses of the freeholder.
The figure above is based on a flat costing the UK average of £257,000, with a ground rent of £100 a year and 82 years left on the lease.
Below, we break down the full cost of extending a lease.
Service
Cost
Lease extension premium
£5,967
Solicitor fee
£600-£1,200
Surveyor’s valuation fee
£600-£900
Freeholder’s valuation fee
£600-£900
Surveyor’s negotiation costs
£150 - £200 an hour
Land registry fees
£20 - £40
Unless otherwise stated, all cost data is taken from real prices received by thousands of Konnect You users.
What is the 20-Year Lease Rule?
The 20-year lease rule is based on the Leasehold Reform, Housing and Urban Development Act 1993.
If a lease on a home has less than 80 years remaining when it is first granted, and the term is for more than 21 years, the leaseholder has the right to extend it for another 90 years. If you are curious we have a guide on if you should buy a flat with a 90 year lease.
This will be at a cost to the leaseholder. The rule applies to most residential leasehold homes in England and Wales. It is designed to allow leaseholders to extend their lease, preventing the property from losing value as a result of a short lease.
The rule does not apply to the following:
Some rent-controlled flats
Some flats in almshouses
Certain types of charitable housing trusts
Flats in National Trust properties
Government Changes For Leaseholders
The Leasehold and Freehold Reform Act 2024 aims to make it cheaper and easier for leaseholders to extend their lease. It also aims to help those looking to buy the freehold.
Although the Act received Royal Assent under the previous government, it is not yet in force. The current Labour government will decide when and how it will be implemented.
Key changes regarding lease extension include:
Marriage value removed from the cost calculation
Increases standard lease extensions to 990 years (from 90 years for flats and 50 years for houses)
Removes requirement for a leaseholder to have owned their home for two years before extending the lease
Limits the fee landlords charge for sales packs when a leaseholder wants to sell the home
Ban leasehold tenure on the sale of new-build houses
How to Find a Conveyancer for Your Leasehold Purchase
If you are looking to purchase a leasehold property, you will require a qualified and trusted conveyancer.
Konnect You can match you with up to 5 regulated conveyancers. Fill in our conveyancing form to get connected with professionals suited to your move, then review what’s included and choose with confidence.
Before joining our network, all conveyancers must pass our strict verification process. This includes being regulated by one of the following:
Solicitors Regulation Authority (SRA)
Council for Licensed Conveyancers (CLC)
Law Society of Scotland (LSS)
Law Society of Northern Ireland (LSNI)
Chartered Institute of Legal Executives (CILEX)
FAQs
A “good” lease length is essentially as long as possible. A 99-year lease is relatively standard and is considered a “good” lease length. Newer leases are at least 125 years and in some cases, much longer. The longest leases available are 999-year leases, ensuring you will not be in a position where the lease will run out.
Forfeiture is a way for a freeholder to evict a leaseholder and/or terminate the lease if a condition of the lease is broken. An example would be if they did not pay the required ground rent or service charges.
If a residential lease is not renewed, it will expire, and the property reverts to the freeholder. As a result, the leaseholder will lose legal rights and ownership.
A 999-year lease is the maximum length a leasehold on a property can have. This can give buyers peace of mind that they won’t need to pay any lease extension costs. It can provide you with security but you still will not own the property or land outright.
