Lease Extension Update – No More 2-Year Ownership Rule!

Great news for leaseholders! You no longer need to wait 2 years to extend your lease. Under recent legal changes, you can apply for a statutory lease extension as soon as you own the property.

There are two main ways to extend your lease in England and Wales:

1. Statutory Lease Extension (Leasehold Reform, Housing and Urban Development Act 1993)

This is the most secure and cost-effective way to extend your lease. The key features include:

• Eligibility – Previously, leaseholders needed to have owned the property for at least two years. However, under the latest reforms of 31 January 2025, this restriction has been removed. Now, leaseholders can apply as soon as they own the property.
• Additional Years – You are entitled to an additional 90 years on top of the remaining lease term.
• Ground Rent Reduction – The ground rent is reduced to zero (peppercorn rent).
• Valuation – The cost of extension is determined using a statutory formula.

2. Informal (Voluntary) Lease Extension

Alternatively, leaseholders can negotiate directly with their freeholder for an extension. The benefits include: More flexibility in lease terms; Potentially faster process compared to the statutory route; Possible lower legal and valuation fees.

However, an informal extension does not guarantee the same protections as a statutory lease extension. For example, the freeholder may propose an increase in ground rent or less favourable terms. Some freeholders do not engage in voluntary lease extensions.

The Lease Extension Process for statutory lease extensions explained:

1. Check Your Lease – If your lease is approaching 80 years or less, it is crucial to act quickly to avoid additional costs such as marriage value, which increases the price of extension.
2. Obtain a Valuation – A chartered surveyor can provide a professional valuation to estimate the premium you will need to pay for the lease extension. This step is not mandatory but recommended to make sure you are aware of the fair market price for your lease extension.
3. Serve a Section 42 Notice – Leaseholders formally notify their freeholder of their intention to extend the lease under the Leasehold Reform, Housing and Urban Development Act 1993.
4. Freeholder’s Counter Offer – The freeholder cannot refuse to grant the lease extension but has two months to respond with a counter-notice if they believe the proposed fee or other terms need to be amended.
5. Negotiation – If the freeholder disputes the premium or terms, negotiations will take place. If an agreement is not reached, leaseholders can apply to the First-tier Tribunal (Property Chamber) for a decision.
6. Completion – Once both parties agree on the terms, the lease extension is completed, and the new lease is registered with the Land Registry.

Why Act Now?

With the recent changes allowing leaseholders to extend their lease immediately after purchase, now is an excellent time to secure your property’s future. Extending your lease early can save you money, increase your property’s marketability, and give you peace of mind.

If you’re considering a lease extension, contact NC Law today. Our specialist solicitors can guide you through the process, ensuring you secure the best possible terms.