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Lease Extension Cost

03/05/2023
(Last Updated: 28/06/2024)
9,806
13 min read
Key Takeaways
  • Lease extension costs range from £3,600 to £6,598 for valuation and legal work.
  • Top Tip: Don't just rely on an online lease extension calculator to determine your premium. Get a RICS valuation for an accurate valuation, or you could pay more than the property is worth.
  • Your premium will be based on your valuation.
  • You may also be liable to pay Stamp Duty.
  • You'll have to pay a solicitor or licensed conveyancer to handle the transaction whether you take the informal or formal route.

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.

Some of the expected changes include:

  • 990 year standard lease extension for houses and flats
  • Standardised format for service charge bills, for greater transparency
  • Leaseholders will no longer have to pay their freeholder’s costs when making a claim
  • Freeholders who manage their building directly must belong to a redress scheme, so leaseholders can challenge them if needed (already applies to managing agents)
  • Ban on sale of leasehold houses, except in specific circumstances and schemes
  • Fair and transparent buildings insurance handling fees
  • Removal of two year requirement before statutory extension

While the existing act abolishes ground rent on lease extension and new leases, the new act does not cap ground rent on pre-existing leases.


The lease extension process

The lease extension costs vary depending on the route you take:


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.

  • RICS lease extension valuation . This confirms the premium to pay for the additional 90 years.
  • Section 42 Notice. This confirms your offer to extend your lease to the freeholder.
  • Surveyor Negotiations. If your freeholder disagrees with your premium.
  • Deed of Substituted Security. Where you have a mortgage the deed of substituted security updates the charge on the title for your mortgage lender.
  • Deed of Variation/Completion. The deed of variation is what updates your lease's terms including the lease length, ground rent and some of the other statutory clauses.

Other costs that could crop up:

  • Tribunal. Where you can't confirm the premium to pay for the additional 90 years you can apply to the Tribunal to determine the premium.
  • Vesting Order. If your freeholder is absent or fails to respond to your Section 42 Notice, a vesting order can be granted so the court actions what the freeholder hasn't.

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).

  • Deed of Substituted Security. Where you have a mortgage the deed of substituted security updates the charge on the title for your mortgage lender.
  • Deed of Variation/Completion. The deed of variation updates your lease's terms including the length, ground rent, and other clauses the freeholder chooses.

The statutory lease extension route requires you to seek professional advice from lawyers and surveyors, both of whom can give lease extension process advice.

If you get this wrong, it can cause you to forfeit your rights under the Leasehold Reform Act 1993 for 12 months.

A pen and calculator resting on a statutory lease extension contract. SAM Conveyancing can help you with lease extensions today

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

Free initial leasehold advice

Arrange a free consultation with one of our experienced conveyancing executives on:

Lease Extension Solicitors Consultation
  • 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

Lease Extension Calculator - should you use one?

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 an RICS surveyor inspect and provide a formal valuation. We strongly advise against you doing this.

Leasehold properties should be properly inspected by a chartered surveyor and cannot be accounted for with a basic online lease extension calculator. The formal calculation itself is highly complex in which RICS chartered surveyors spend years gaining 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.


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

  1. any investigation reasonably undertaken of the tenant’s right to a new lease;
  2. 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;
  3. 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.

A cutout of a house alongside letters spelling out 'freehold reasonable costs'. SAM Conveyancing can assist with lease extensions and ground rent costs

How do you know what is a reasonable cost?

Under Section 60 of the Leasehold Reform, Housing and Urban Development Act 1993, it states:

(2)any costs incurred by a relevant person in respect of professional services rendered by any person shall only be regarded as reasonable if and to the extent that costs in respect of such services might reasonably be expected to have been incurred by him if the circumstances had been such that he was personally liable for all such costs.

In summary, the leaseholder will pay for the investigation of the section 42 notice, the freeholder's premium for valuation advice (if they get one) and the lease extending fees for drafting the lease variation and completion. The landlord's costs must be reasonable, so if you are concerned that the freeholder's extension costs are unreasonable then you can look to get the costs determined.

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:


Lease Extension Valuation

Range 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.


Section 42 Notice – The Tenant’s Notice

Range from £600 to £1,200 payable to 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.

A man signing a legally binding contract with the help of SAM Conveyancing. Whether you want to know more about ground rent, marriage value, or want a leasehold advisory service.

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

Range from £480 to £1,200 payable to solicitor/surveyor

The most common issue with a lease extension is the negotiation. A surveyor and solicitor must work in tandem to negotiate the long lease extension survey and to give reasons for any assumptions included within it.

It's common for lease extension solicitor costs to work to an hourly rate - this is because the negotiations can prove to be drawn out: often neither party is willing to negotiate on their offer. Surveyors can then be asked to examine the property again and liaise between themselves to get to a fixed fee they can both agree on.

A chessboard with a king and queen spotlighted. Flat owners, whether for a short lease or long, can count on SAM Conveyancing for professional advice.

Lease Extension Conveyancing

Range from £700 to £1,200 payable to solicitor/surveyor

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. 

Lease Extension Premium

The lease extension premium is what you pay to your freeholder to extend your lease.

The rule of thumb is that the fewer years there are left on the lease then the higher the likely cost of the extension premium will be. The table below gives a rough guide to what you might have to pay as an extension premium with a varying number of years remaining on the lease.

It's clear that below 20 years left on a lease, rises are steep. An inaccurate lease calculation can cost you time and money.

Marriage Value Increases Lease Extension Premium

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.

Lease term leftPercentage of unimproved end value
5 years82%
10 years69%
14 years57%
20 years45%
30 years34%
40 years25%
50 years18%
60 years13%
70 years8%
80 years5%

Frequently Asked Questions
Value
Long
Refuse
Early
Liable
Andrew Boast of Sam Conveyancing
Written by:
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 Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.


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