What does leasehold mean?
Leasehold is a property term which means that the leaseholder doesn’t own the land that the property is built on (as this belongs to the freeholder) but the leaseholder has permission to live in or use it for the duration of the lease.
Most leases start at a length of somewhere between 99 years and 999 years. If the lease has less than 80 years left to run, this can cause issues if the leaseholder wishes to sell, as many mortgage lenders won’t lend to buyers wanting to purchase a property with what is considered a short lease.
What is a leasehold property?
Some houses are leasehold, but the majority of leasehold properties are flats. If you buy a leasehold property, you become the leaseholder, but you won’t actually own the property and the land it sits on unless you purchase the freehold.
The duration and terms of these leases can vary widely. Some leaseholds properties are subject to annual ground rent that must be paid to the freeholder, or their representative, which may be a management company.
What is the difference between freehold and leasehold?
Freehold refers to the person (freeholder) who owns the property and the land it sits in. Leasehold refers to the person (leaseholder) who owns the lease that allows them to use the property for the duration.
If you buy a leasehold property, you never truly own it; instead, you essentially rent it on a long lease from the freeholder. The ground rent that you might be required to pay to the freeholder annually will vary, depending on the terms of your lease.
How is a leasehold extended?
If you want to extend the lease on a leasehold property, you will need to come to an agreement with the freeholder about this. You will need a solicitor to handle the legal process for you and help you negotiate the price, if needed.
The first step is to inform the freeholder that you want to extend the lease. You can approach them informally or through the statutory route. Your solicitor can help deal with this, along with ensuring all of the legally required paperwork is carried out.
When can you request a lease extension?
The right to request a lease extension generally starts once you have owned the property for two years. If you are thinking of selling a property which still has a relatively short lease, Stephensons can obtain a lease extension before marketing the property. This will make a difference to the sale value.
Anyone purchasing a leasehold property should look carefully at the length of the lease remaining and seek the advice of a solicitor regarding the costs of extension to make sure that any investment in this type of property is a sound investment. Any mortgage lender will require that the remaining lease term is of a required minimum length before they will lend money on a property.
How much does it cost to extend a lease?
The cost of extending your leasehold will depend on a number of variables, including the length of time that the lease has still to run, the value of the property and the ground rent that is currently payable.
The freeholder can set any cost they see fit, but if you don’t agree that their cost is fair, you can counter their offer and your solicitor can negotiate on your behalf. If the question of cost cannot be resolved, your solicitor can help you to go to the first-tier tribunal, who will make a judgement on a fair cost.
You will also usually be expected to pay the legal fees of the freeholder for extending the lease.
Lease extension solicitors' costs
Our residential conveyancing solicitors have been carrying out lease extensions for a number of years and as a result we can ensure that this process goes smoothly and efficiently for you. In most situations our lease extension experts are able to offer this service for a fixed fee starting from of £1,250 plus VAT **
Additional fees and disbursements may apply*.
For more information contact us on 01616 966 229.
Our leasehold extension solicitors have an association with a specialist surveyor who we can instruct on your behalf should you require one during the process.
* Additional fees include:
I.D Check (1) person: £5 plus VAT
Bank Transfer: £25 plus VAT
Office Copies: £15 plus VAT
Land Registry Fee: estimated £40 (to be confirmed upon receipt of terms of lease extension)
If you have a mortgage the additional fees for dealing with your lender's requirements in respect of the lease extension: £175 plus VAT
Should we be required to serve a section 42 notice (requesting an extension from the landlord): £500 plus VAT
Lease extensions - section 42 notice
It is also worth drawing to your attention that once a Section 42 notice has been served on the landlord, under lease extension law, you will be responsible for making payment of the landlord's reasonable legal fees, which may include a valuation, and you may also be requested to pay a deposit to the landlord.
If the lease extension becomes disputed beyond the initial notice and counter notice (i.e. application to the leasehold valuation tribunal required) then we will need to review our fees as this is not included within the fixed fee above.
As experienced leasehold property solicitors, our team regularly handle lease extensions for many different types of property and circumstances. If you want to find out more, get in touch with us by calling 0161 696 6187.