How Much Does a Lease Extension Cost?
If you own a leasehold property and want to extend your lease, the main expense is the premium you pay the freeholder to add more years.
For a formal lease extension, the total costs – premium, valuation, and legal fees – typically fall between £3,600 to £6,598. However, your exact figure will depend on your property and circumstances. Our fixed fee for extension conveyancing starts at £720 INC VAT.
An informal extension might seem cheaper upfront, but usually offers less legal certainty. You should also be aware that if the premium is particularly high, you might be liable for Stamp Duty.
Costs can sometimes creep up unexpectedly, especially if legal fees aren't agreed upon upfront. This article is here to give you a clear picture of all the potential expenses involved, including freeholder's fees, negotiation costs, and even Tribunalcosts if needed. We'll also share some tips on how you might be able to keep those costs down during the process.
Lease Extension Premium: What is it?
The most significant cost when extending your lease is the lease extension premium. This is the lump sum amount you pay the freeholder to effectively buy extra time on your lease and compensate them for certain losses.
The premium is calculated based on a few key factors:
Reversion
This accounts for the value the freeholder loses by not getting the property back at the original lease expiry date. The less time left on the lease, the higher the reversion value.
Ground Rent
If your lease has a ground rent, the premium compensates the freeholder for the ground rent payments they will lose for the extended period (formal extensions typically reduce ground rent to a peppercorn).
Marriage Value
This applies when the lease has less than 80 years remaining. It represents the increase in the property's value once the lease is extended, and under current rules (prior to the full implementation of the 2024 Act), half of this uplift is payable to the freeholder. This is why costs rise significantly below 80 years.
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
Formal versus informal extension costs
One of the first distinctions in terms of cost is whether you take the formal statutory route under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended), or negotiate an informal extension directly with your freeholder. The overall expenses can differ significantly between these two approaches, and it's vital to understand why.
Why are informal lease extension costs cheaper?
An informal lease extension can sometimes appear cheaper upfront because it bypasses some of the mandatory legal and procedural steps required by the formal statutory process.
This can potentially mean lower legal and valuation fees in some cases, as you don't have to adhere strictly to the formal notice procedures and timelines.
Additionally, the premium negotiation is less rigidly defined by legislation, which might sometimes result in a lower agreed premium if you have a very amenable freeholder, although this is not guaranteed and depends entirely on negotiation.
However, it's crucial to understand why it can be cheaper and the potential trade-offs. While potentially saving money initially, the informal route offers significantly less legal protection for the leaseholder.
The freeholder is not legally obligated to grant an extension or agree to terms favourable to you. They can negotiate freely, change their mind during the process, or include terms in the new lease (such as escalating ground rent) that you might want to avoid.
Critically, there is no statutory right to take the freeholder to the Tribunal if you cannot agree on the premium or terms, leaving you with less recourse if negotiations break down.
In contrast, the formal statutory route provides essential legal rights and a structured process.
As long as you meet the eligibility criteria, the freeholder must grant a lease extension, the premium and process are determined according to defined legal principles, and there is a clear statutory mechanism (the First-tier Tribunal - Property Chamber) to resolve disputes over the premium or lease terms, providing much greater certainty and protection for the leaseholder.
- Fixed Fees.
- Leasehold Specialist Solicitors.
- RICS Surveyor Negotiations.
- Complicated jargon made simple.
- Preparation and serving of Section 42 Notice.
How much does it cost to extend a lease?
Type of Cost | Estimate (£) |
RICS Lease Extension Valuation Required to value the premium payable to extend your lease by an additional 90 years. | £600 to £899 |
Freeholder's Lease Extension Valuation Not always required if your freeholder agrees to the premium you put forward. | £600 to £899 |
Section 42 Tenant's Notice served by solicitor This is the formal serving of the section 42 notice on the freeholder and sets out your rights and offer to extend your freehold and leasehold property. | £600 to £1,200 |
Surveyor Negotiations (if required) If your initial offer is rejected in the landlord's section 45 counter notice then your solicitor and or surveyor will need to support you in negotiations with the freeholder's surveyor. | £150 to £200 per hour |
Your Lease Extension Conveyancing Once you know how much to offer the freeholder, you can instruct a solicitor to handle the serving of the section 42 notice and review the new lease. | £600 to £1,200 |
Freeholder's Lease Extension Conveyancing The freeholder's solicitor drafts the new lease or a variation on the existing lease. | £600 to £1,200 |
Lease Extension SDLT HMRC (only if applicable) Unless the premium is large and/or you are extending the lease on your second property, you are unlikely to have to pay stamp duty for the extension. If you are unsure, use our stamp duty calculator. (You are responsible for paying any stamp duty which might be due and should ultimately contact HMRC if in any doubt.) | £0 and upwards (if applicable) to £1000s |
Total cost of legal work for Lease Extension (excluding Lease Extension Premium) | £3,600 to £6,598 |
Lease Extension Solicitor Costs: Fixed Fees vs. Hourly Rates
Legal fees are a significant part of the overall cost of extending your lease, covering the specialist conveyancing work required to formally alter the terms of your lease or create a new one.
When instructing a solicitor for a lease extension, you encounter two main charging structures: fixed fees or hourly rates.
Fixed Fees
A fixed fee means that the solicitor agrees on a set price for the legal work involved in your lease extension from the outset.
This provides cost certainty, allowing you to budget effectively without worrying about unexpected increases in legal expenses, provided the scope of work remains within the initial agreement.
Hourly Rates
Some solicitors charge for their time based on an hourly rate. While they might provide an initial estimate of the total cost, this can be subject to change depending on the actual time spent on your case.
For potentially complex or drawn-out lease extensions, relying on an hourly rate can lead to costs spiralling beyond your initial expectations, making it difficult to budget accurately.
Opting for a solicitor who offers a Fixed Fee for the legal work provides greater peace of mind and financial predictability. It ensures you know the exact cost of the legal conveyancing from the start, protecting you against unforeseen hours adding significantly to your bill.
You are liable for the freeholder's extension costs
When you extend your lease using the formal statutory process, you are legally responsible for paying the freeholder's reasonable costs.
This includes their legal fees, valuation fees, and any other reasonable expenses they incur as part of the lease extension process.
The law states that any professional fees the freeholder incurs should only be considered reasonable if they are costs that the freeholder might reasonably expect to pay if they were personally liable for them.
This is to ensure that you are not overcharged. If you are concerned that the freeholder's extension costs are unreasonable, there are steps you can take to challenge them.
Find out more about challenging unreasonable freeholder costs.
When do you pay the costs?
Costs are incurred at several key stages throughout the process, particularly when following the formal route:
RICS Valuation
The cost for your RICS valuation report is usually paid upfront to the surveyor when you instruct them and are ready to start the process. This valuation is needed early on to help determine the premium you will offer.
Section 42 Notice
Your solicitor's fee for preparing and serving the formal Section 42 Notice on the freeholder is typically payable when the notice is served, or shortly before. This notice legally triggers the formal lease extension process.
Freeholder's Costs
After you serve the Section 42 Notice, the freeholder may serve a Section 45 Counter Notice.
Around this time, you will often become liable for the freeholder's reasonable costs incurred up to that point (such as their valuation and legal fees for reviewing your claim).
You may also be asked to pay a deposit of 10% of the premium you have offered or agreed upon.
On Completion
The remaining balance of the agreed premium, along with any outstanding professional fees (yours and the freeholder's agreed reasonable costs) and potential Stamp Duty Land Tax, are usually paid on completion of the lease extension. This is when the legal process is finalised, and the new lease is formally granted.
How do you negotiate the lease premium?
The lease extension premium is often the largest single cost involved, and while its calculation is based on set principles, there is often room for negotiation between you (the leaseholder) and the freeholder. Effective negotiation is key to potentially reducing the final premium you pay.
Here's how the negotiation process typically works regarding the premium:
- Initial Offers: After you serve your formal Section 42 Notice proposing a premium, the freeholder will respond with their own valuation in a Section 45 Counter Notice. There is often a significant difference between these initial figures.
- The Role of Professionals: This is where your specialist leasehold surveyor plays a crucial role. Armed with their professional valuation and knowledge of the market and legal precedents, they will negotiate with the freeholder's surveyor to bridge the gap between the initial offers.
- Finding Agreement: Negotiations involve examining the details of both valuations and finding a compromise figure. Factors like the comparables used, the assumed value of the extended lease, and the specific details of your property and lease will be discussed.
- Aiming for a Settlement: The goal is to reach an agreement on the premium through negotiation without needing to involve the First-tier Tribunal. While negotiation takes time, successfully settling avoids the additional costs and time associated with a Tribunal hearing.
Having an experienced leasehold surveyor negotiating on your behalf is vital. They have the expertise to argue your case effectively and ensure you don't pay more than a fair premium based on the legal valuation principles.
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What are the costs of going to Tribunal?
If negotiations with the freeholder over the premium or other terms reach a stalemate in the formal lease extension process, either party can apply to the First-tier Tribunal (Property Chamber) for a determination.
While less costly than traditional court proceedings, going to Tribunal still involves significant expenses that you should be aware of. The main costs associated with taking a lease extension case to Tribunal typically include:
Application Fees
There are fees payable to the Tribunal when you submit your application and potentially for the hearing itself. These are set fees, usually less substantial than professional fees, but still a cost to consider.
Professional Fees
This is usually the most significant cost. You will need your specialist leasehold surveyor and solicitor to prepare your case, provide expert evidence, and represent you at the Tribunal hearing.
This involves considerable time and work, and their fees will reflect this.
Freeholder's Costs
In most lease extension cases before the Tribunal, each party is responsible for their own professional costs.
However, there are circumstances where the Tribunal might order one party to pay the other's costs, although this is uncommon for valuation disputes unless a party has acted unreasonably.
You remain liable for the freeholder's reasonable costs incurred up to the point of applying to the Tribunal.
Going to Tribunal can add several thousands of pounds to the overall cost of your lease extension due to the professional time required to prepare and present the case.
While it provides a resolution mechanism, successfully negotiating a settlement outside of Tribunal is often more cost-effective.
How to minimise your lease extension costs
Extend in good time
Extending your lease gets significantly more expensive when the remaining term runs down to 80 years or less.
To minimise costs, especially the premium calculation which includes Marriage Value below this threshold, you should begin the process with ample time to spare, ideally when the lease is still well above 80 years.
RICS Valuation
A professional RICS valuation report by a specialist leasehold surveyor comes with an upfront fee. However, this investment provides a robust, legally backed figure that forms the basis of your premium offer and negotiation.
This can save you a substantial amount in the long run by preventing you from overpaying the premium or avoiding costly disputes that arise from inaccurate valuations.
Some leaseholders consider skipping the professional valuation to save the initial fee. While this does reduce the upfront cost, it comes with significant risk.
Without a professional valuation, you lack a strong, defensible basis for negotiation, making you vulnerable to the freeholder's potentially higher demands.
This can easily lead to you paying a higher premium than necessary or negotiations breaking down, potentially forcing you into the more expensive Tribunal route.
Choosing not to get a RICS valuation to save money is a calculated risk that may cost you far more in the end.
Choose specialist legal expertise
Instructing experienced, specialist leasehold solicitors is crucial for a smooth and cost-effective lease extension.
While their fees might be comparable to general conveyancers, their expertise in the complexities of lease extensions can save you money by avoiding errors that could cause delays, trigger additional fees from the freeholder or your own professionals, or compromise your legal position.
Opt for the formal route for certainty
Choosing the formal statutory route provides legal certainty and protections that can ultimately save you money compared to a potentially problematic informal negotiation.
While it follows a defined legal process, this structure ensures the freeholder must extend your lease, and the premium is calculated according to legal principles.
This predictability, and the right to go to Tribunal to resolve disputes reasonably, helps prevent costs from spiralling indefinitely in an unregulated informal negotiation where the freeholder could walk away or impose unfavourable terms (like high ground rent or clauses) that cost you more over time.
Should you use a Lease Extension Calculator?
Online lease extension calculators might seem like a way to save money on a professional valuation. However, we strongly advise against skipping a proper RICS valuation by a chartered surveyor.
Basic online calculators cannot accurately value complex leasehold properties. Formal premium calculations are intricate, requiring a surveyor's expertise. Relying solely on a calculator means your offer might not be taken seriously by the freeholder, especially in disputes or if the case goes to tribunal.
Getting a formal RICS valuation protects your position in negotiations and ensures your premium offer is based on a defensible figure, ultimately helping you avoid overpaying or facing costly disputes.
Free Initial Leasehold Advice
Arrange a free consultation with one of our experienced conveyancing executives on:
- Lease extension.
- Purchasing the leasehold, freehold or share of freehold.
- Selling a leasehold property with a short lease.
- Extending the lease at the same time as you sell.
We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:
- RICS Lease Extension Valuation or L2 Homebuyers Survey.
- Serving of the section 42 notice or section 13 notice on the freeholder.
- Negotiation with the freeholder (with the support of your RICS valuer).
- Completion of the legal work, including deed of variation.
- Application to Tribunal to determine the premium.
- Vesting order for absent landlords.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
