How Much Does a Lease Extension Cost?
- The cost of renewing a leasehold property ranges from £3,600 to £6,598 for valuation and legal work. Your premium is roughly a percentage of the unimproved end value, depending on the length remaining.
- To calculate your exact lease extension cost get a RICS valuation, from £300 EXC VAT, which will determine your premium. You may be liable to pay Stamp Duty if the premium exceeds the threshold.
- You'll have to pay a solicitor or licensed conveyancer to handle the legal transaction whether you take the informal or formal route, our fixed fee for extension conveyancing starts at £720 INC VAT.
- You should start to think about extending your lease at around 90-85 years remaining. Extension gets more expensive when there are 80 years or less left.
Leaseholds are a form of property ownership which is limited to the duration of the lease; typically they start at 99 or 125 years long. When the lease expires, you have to give the property back to the freeholder. A lease extension is a legally binding contract between the leaseholder and the freeholder, where the leaseholder buys more time in the property. The cost of extending the lease is calculated based on several factors:
- The value of the property now and after the lease extension
- The length of the current lease and the amount you extend by
- The ground rent payable on the remaining lease
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
How much does it cost to renew a leasehold? Your lease extension premium
The main cost of lease extension is the lease extension premium. This is the amount you pay the freeholder to buy extra time on the lease (called reversion), it also compensates them for any ground rent which they will lose when the lease is extended formally, and may also include marriage value. If you are extending informally, you'll still pay all the ground rent, at the old rate, for the rest of the old lease term.
Lease extension cost: Reversion
The reversion rate is based on the amount of cash which would accumulate up to the current market value of the property, over the remaining length of the existing lease. The reversion amount is roughly the amount of cash you would need to put into a 5% savings account to reach the current market value over the remaining lease. For example:
£7,061.95 is the amount you'd need to pay on a leasehold worth £350,000, with 80 years remaining on the lease. £7,061.95 x 1.05, over 80 years = £350,000.42.
Lease extension cost: Ground Rent
This is calculated similarly, but at a rate of 6-7%. For example:
If you pay ground rent at £25 per month, and have 80 years remaining. The freeholder will lose out on £2,000 over 80 years. Your ground rent portion of the premium will be the amount amount of cash you would need to put into a 6-7% savings account to reach £2,000 after 80 years. £18.91 x 1.06, over 80 years, = £2000.60
This example does not account for increasing ground rent. It is essential to contact a professional for an accurate lease extension calculation on your specific lease.
Lease extension cost: Marriage Value
When you extend a lease that has less than 80 years to run, there is an additional fee to be paid to the landlord called a Marriage Value fee.
When a Lease is extended, it adds value to the property. Under the 1993 Leasehold Reform Act, the landlord is legally entitled to half of the increase in the value of the property.
Marriage value has been abolished in the 2024 Act, but is not yet in effect. Marriage value is still payable on extensions of leases with less than 80 years remaining, until the new government bring the new laws into force.
How much does a lease extension cost in fees?
The lease extension costs vary depending on the route you take. The statutory lease extension route requires you to seek professional advice from lawyers and surveyors. If you get this wrong, it can cause you to forfeit your rights under the Leasehold Reform Act 1993 for 12 months.
How much does it cost to extend a lease? | £ Estimate |
RICS Lease Extension Valuation Required to value the premium payable to extend your lease by an additional 90 years. | Range from £600 to £899 |
Freeholder's Lease Extension Valuation Not always required if your freeholder agrees to the premium you put forward. | Range from £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. | Range from £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 to try and find a figure that both parties will agree to. | Range from £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 reviews the new lease. | Range from £600 to £1,200 |
Freeholder's Lease Extension Conveyancing The freeholder's solicitor drafts the new lease or a variation on the existing lease. | Range from £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, we recommend you use our stamp duty online calculator, whether the extension is for your primary property or secondary leasehold properties. Our online calculator and HMRC themselves can guide you as to whether there are other fees you have. (You are responsible for paying any stamp duty which might be due and should ultimately contact HMRC if in any doubt.) | Range from £0 and upwards (if applicable) to £1000s |
Total cost of legal work for Lease Extension (NB not including Lease Extension Premium) | Range from £3,600 to £6,598 |
Survey costs: Lease Extension Valuation
The valuation cost ranges from £600 to £899, payable to a RICS surveyor
The Leaseholder has to pay for the Freeholder's ‘reasonable legal and valuation costs, except any costs which are incurred in connection with proceedings before an LVT’, according to the Leasehold Reform, Housing and Urban Development Act 1993.
The Freeholder's 'reasonable valuation costs' therefore must be paid for by you. Of course, what constitutes 'reasonable' is a grey area but a good rule of thumb is to get 3 surveyors' quotes for a leasehold extension valuation and take the average as a benchmark to decide if the declared costs are reasonable.
We charge £600 Inc VAT for our RICS surveyors and give an exact cost to pay the Freeholder for the lease extension. The cost includes visiting the property, calculating a current market valuation and an estimate of the cost of the property if the lease is extended.
The Freeholder can get their independent professional valuation but if you give them an offer based on an independent RICS surveyor's valuation, they can choose to adopt this. The Freeholder won't normally do this, however, if you've only used an online lease extension calculator; you'll then be expected to pay for their independent professional valuation.
You are liable for the freeholder's extension costs
Under Section 60 of the Leasehold Reform, Housing and Urban Development Act 1993 it states:
(1) Where a notice is given under section 42, then (subject to the provisions of this section) the tenant by whom it is given shall be liable, to the extent that they have been incurred by any relevant person in pursuance of the notice, for the reasonable costs of and incidental to any of the following matters, namely
- any investigation reasonably undertaken of the tenant’s right to a new lease;
- any valuation of the tenant’s flat obtained for the purpose of fixing the premium or any other amount payable by virtue of Schedule 13 in connection with the grant of a new lease under section 56;
- the grant of a new lease under that section; but this subsection shall not apply to any costs if on a sale made voluntarily a stipulation that they were to be borne by the purchaser would be void.
Section 42 Lease Extension Cost
The tenant's Section 42 Notice ranges in cost from £600 to £1,200, payable to the solicitor.
The Section 42 Notice activates the legal machinations required for getting the new lease. You are liable to pay the landlord's reasonable costs as before and from the date they received the Notice.
You must therefore ensure that the Notice served is completely error-free because even though you can apply to the county court to make amendments to it, you'll have to pay additional money to do so. Should the Notice be found incomplete in court proceedings, it can be ruled invalid.
The serving of the Section 42 Notice sets the leasehold valuation tribunal date. The tribunal date is when the variables affecting the extension price are set – for example, the remaining number of years left on the lease, the present value of the leasehold property and its assumed future value.
Therefore, however long the negotiation or determination of the price takes, it will be based on the factors applying on the date that the Tenant's Notice is served.
After your solicitor has served the Section 42 Notice on your behalf, you can be asked by the Freeholder to pay 10% of the premium agreed as a deposit. This money is then held by the landlord's solicitors.
What is leasehold enfranchisement?
Leasehold enfranchisement involves the processes and procedures to go through in extending the lease or acquiring a portion of the freehold.
A freehold company is required when more than four people want to own the freehold of a block of flats. Each leaseholder that buys into the freehold becomes a shareholder and gets a say in how the block of flats is run.
Are you a qualifying leaseholder?
Collective enfranchisement is the right for leaseholders of a building to join together and buy the freehold from the landlord.
Negotiations
Negotiations, if applicable, can range from £480 to £1,200, payable to the solicitor.
The most common issue with a lease extension is the negotiation. Lease extension solicitor costs are commonly worked around an hourly rate, because negotiations can be drawn out: often neither party is willing to negotiate on their offer, and it can take some back and forth to find a mutually agreeable compromise. The good news is that if you're forced to go to tribunal, this is much cheaper than a traditional court.
Solicitor costs: Lease Extension Conveyancing
Conveyancing costs on a lease extension range from £700 to £1,200, payable to the solicitor.
Once you and the Freeholder have agreed on the premium, your conveyancing can start. The Freeholder’s solicitor drafts the new lease ready for your solicitor to agree to and amend any terms as appropriate.
How to minimise your lease extension costs
Extend in good time
Extending gets more expensive when the clock runs down to 80 years, begin the process with time to spare.
Get a RICS survey
A reliable survey can save you an expensive dispute over the premium.
Choose quality conveyancing
Specialist leasehold solicitors don't necessarily cost any more, but their experience and expertise can save you money in the event of any issues or quirks with your transaction.
Opt for the formal route
Section 42 lease extension costs are more predictable than the informal route, and you have statutory rights and protections which mean you can pursue the extension through to tribunal, rather than risk wasting your money with an informal extension, which could be stopped at any time.
Get an online quote to see how we can save you hundreds of pounds on your valuation and legal costs, get a quote or arrange a free initial consultation with a member of our team:
The lease extension process
Formal Route | Informal Route |
The formal lease extension route where you buy a fixed 90 years on top of the already existing lease term with a peppercorn ground rent.
Other costs that could crop up:
| The informal lease extension route ensures you extend for any length from 1 to 999 years, but the premium is informal and timescales can be any length. As of the Leasehold Reform Act of 2022, freeholders cannot collect ground rent for an already extended lease period (they can continue charging the previously agreed ground rent for the remainder if the lease falls within the pre-existing term).
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Free initial leasehold advice
- 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
- 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
Should you use a Lease Extension Calculator?
A simple search online for a lease extension calculator returns results which might make you think you can use a calculator instead, saving on the eventual cost of having a RICS surveyor inspect and provide a formal valuation. We strongly advise against skipping a proper valuation.
Leasehold properties should be properly inspected by a chartered surveyor and cannot be accurately valued with a basic online lease extension calculator. The formal calculations themselves are complex, in which RICS chartered surveyors have years of experience.
In the case of a Section 42 lease extension process, only a genuine RICS calculation is likely to be taken seriously by your freeholder, particularly if there is a dispute over the premium and, even more importantly, if you end up having to go to tribunal.
Even in an informal lease extension negotiation, you are protecting yourself as best as you can by getting a formal RICS valuation and not relying on an online lease extension calculator.
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.
