Lease Extensions: Why the Best Time to Act Is Early

If you own a flat, there is almost always a lease involved, and that lease has a finite term. Every year that passes, it gets shorter. Most leaseholders know this in principle and give it very little thought in practice, which is understandable when the remaining term still runs to decades.

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The difficulty is that a lease is a wasting asset. The shorter it gets, the more it affects what your flat is worth and how easily you can sell it, and the more it costs to put right.

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Why the remaining term matters

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A short lease affects far more than the eventual expiry date.

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Lenders take a close interest in the remaining term. Many will not lend where it falls below a certain length, or will lend only on restricted terms, and each lender sets its own threshold. That immediately narrows the pool of buyers for your flat to those who can purchase without a mortgage.

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Buyers and their solicitors look at it too. A flat with a short lease is harder to sell, takes longer to sell, and generally sells for less. In some cases a sale falls through entirely once the buyer’s lender takes its own view on the term.

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So the remaining term is not an abstract future problem. It affects what your flat is worth today.

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The cost of waiting

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Extending a lease is not something that gets steadily more expensive in a straight line. The sum payable to the freeholder rises as the remaining term falls, and it accelerates as the lease gets shorter.

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That means the same extension costs more the longer you leave it, and the increase is not recoverable by acting shortly afterwards. Leaseholders who extend while the term is still comfortably long are in a materially better position than those who wait until a sale forces the issue.

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Two routes, and they are not the same

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Broadly, there are two ways to extend.

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There is a statutory process, which gives qualifying leaseholders a right to extend on terms set by law, with a defined procedure and a valuation framework behind it.

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There is also an informal route, where you negotiate directly with your freeholder outside that process. That can be quicker and simpler, but the terms are whatever the freeholder is prepared to agree, and they may be considerably less favourable than the statutory route would produce. Informal extensions sometimes carry provisions that cause difficulty later.

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It is worth understanding both, and what each would mean for you, before committing to either.

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Why leaseholders delay

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Usually because nothing forces the issue. No deadline arrives, the lease simply gets shorter, and the cost of dealing with it rises quietly in the background.

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The leaseholders who find themselves in difficulty are rarely those who decided not to extend. They are those who always intended to, and then came to sell.

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Taking advice early

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If you own a leasehold flat, it is worth knowing your remaining term and what it means for you, well before you need to do anything about it.

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You can find out more about how our team can help at marsons.co.uk/services/conveyancing/lease-extension.