Are You Spending Too Much on the Renewal of Your Lease?

London-based Osbornes Law says yes. The company issued a statement which outlines that landlords who own leasehold properties are simply unaware that the freehold management company can be negotiated with, as opposed to the landlord going through the statutory process. In turn, a lot of spare income would be spared through the extinguishment of legal fees, and the process would be multiple times quicker.

Krishnan-Bird of Osbornes Law explains: “I have seen many times homeowners ask for a lease extension to be carried out, as they need to remortgage or sell their property, only for them to be shocked at how long it takes. The statutory process takes anything between six months and a year or longer so if you need to extend your lease then it is best to plan in advance.

“Many homeowners don’t realise that there is a much better option of reaching out to the freeholder and voluntarily negotiating a lease extension instead of going through the statutory process. This is also a lot quicker as it can be carried out in as little as a month. A leaseholder simply has to ask the freeholder if they are open to them extending their lease and on what terms?

“A lease extension through the statutory process must be for 90 years on the basis that the ground rent is nil, but under a voluntary negotiation you can change the terms. For example, if you are looking to sell a property and do not want to pay for the full lease extension of 90 years then you could extend it for a shorter period, saving you money. Agreeing terms before solicitors get involved will also save you money on legal fees. The leaseholder can of course refuse, but it is always worth asking before embarking on the statutory process.”

Those with a leasehold property have the right to make lease extensions as they please, however, if there are less than 80 years left on the lease, extending it becomes extremely costly.  Luckily, the Leasehold Reform (Ground Rent) Act 2022 which was established this year ensures that some of the ‘marriage value’ costs are subdued. 

Krishnan-Bird says: “Given the reforms, homeowners may be wondering if it’s better to wait before starting their lease extension. The problem is, we don’t yet know when, or if, the new legislation will come in. In the meantime, it will be difficult to sell or remortgage properties that are not extended while leases continue to run down and become more expensive to extend whilst you wait.

“Another thing many have asked is if you have a lease of less than 80 years is it worth trying to get a better deal with your freeholder by asking to split the marriage value 50/50, arguing that the freeholder will get much less if you extend the lease once the reforms are brought in? In my experience most freeholders are not budging on this, so you have a choice of extending your lease now or waiting in hope of reforms that may not happen.”