Specialist conveyancing articles to inform you about conveyancing for a house or a flat; whether you already own your own home or if you are buying one. These are free to read and written by specialists in this area.

At SAM Conveyancing we give you all the information you need to know written in a way that makes it easy to understand. We also have a panel of conveyancing solicitors should you need someone to help with conveyancing for buying a home, lease extension, remortgage, transfer of equity, collective enfranchisement, independent legal advice or deed of trusts.

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Lease Extension Cost

06/12/2019

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We specialise in lease extensions and offer the complete service with our solicitors and RICS surveyors. Click to get a competition quote or call us now on 0333 344 3234 (local call charges apply)

* RICS Valuers - Experienced Solicitors - Competitive Prices - National Coverage

There are various lease extension costs when extending your lease including solicitor's fees, Land Registry costs, surveyor's fees, freeholder's fees and the lease extension premium. In rare cases where the freeholder and leaseholder cannot agree on a premium or there has been a breach of the lease extension process there may be further costs including county court fees and First Tier Tribunal (FTT previously the LVT) . We explain each of these costs and include a range that you are likely to pay.

The statutory lease extension route (you can read the lease extension process here) requires you to get specialist support from lawyers and surveyors, both of whom can give lease extension advice. It is a technical area of law which if you get wrong can cause you to forfeit your rights under the Leasehold Reform Act 1993 for a 12 month period. The following costings are estimates when working with qualified solicitors and RICS lease extension surveyors and valuers.

The lease extension premium, as mentioned, is the core sum you pay to your freeholder for extending your lease - please see below for further information and ideas about what you might have to pay.

How much does it cost to extend a lease?

 
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 thee freeholder and sets out your rights and offer to extend your lease.
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
Range from £600 to £1,200
Freeholder's Lease Extension Conveyancing
Range from £600 to £1,200
Lease Extension Stamp Duty HMRC (only if applicable)
Unless your premium is particularly large and/or you are extending the lease on a second or subsequent property which you own, you are unlikely to have pay stamp duty for your lease extension.

If you are unsure, however, we recommend that you use our stamp duty calculator, whether the extension is for your primary property or secondary leasehold calculator HMRC can guide you as to whether this is a further aspect of fees you have to budget for.

(Please note however that you are personally responsible for paying any stamp duty which might be due and should ultimately contact HMRC if you are 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


Does extending a lease add value?

Yes. For you as a leaseholder, you are adding value to your property when it comes to selling and you give yourself a much greater likelihood of being granted a remortgage for example. 

How long does it take to extend a lease?

Many factors determine how long it takes to extend a lease. As a very loose estimate, an informal lease extension might take a matter of weeks - however there are no guarantees that you'll be offered one or if you start the process that you'll be able to complete it and you risk losing any money you spend on the process up to the point that negotiations break down.

In the case of the formal process, you should allow for at least 6 months and up to 1 year.

Can freeholder refuse to extend lease?

No - as long as you choose to take the formal/Section 42 path. If you opt for an informal lease extension however, your freeholder can refuse your request and, even worse, might permit you to go into the process and spend money and then suddenly refuse to negotiate further leaving you with no recourse to getting a refund for any money you've spent.

Can I extend my lease before 2 years?

Not if you are taking the formal/Section 42 path. You must have owned (but not necessarily have actually lived in) the property for at least 2 years before you can apply.

You can possibly extend a lease informally before 2 years of ownership has elapsed, however, as explained above, there are absolutely no guarantees.
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Lease Extension Cost Calculator - should you use one?

A simple online search for a lease extension cost calculator - or a secondary leasehold calculator - returns many results which might reasonably make you think you can save lease extension costs related to getting a RICS lease extension surveyor to carry out an inspection and produce a formal valuation range. We strongly advise against you doing this.

Any individual leasehold property has its own particular characteristics and the formal calculation itself is a highly complex one which RICS surveyors spend years gaining experience in.

Particularly in the case of the formal/Section 42 lease extension path, only a genuine RICS lease extension calculation and pricing is likely to be taken seriously by your freeholder particularly if there is a dispute and, even more importantly, if you end up having to go to tribunal.

Even in the case of an informal lease extension negotiation, you are protecting yourself as best as you can by getting a formal RICS lease extension valuation and not relying on an online lease extension cost calculator in terms of having an accurate estimate of what is reasonable. This is discussed further below.


You are liable for the freeholder's lease extension costs


(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.

How do you know what is reasonable?

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

(2) For the purposes of subsection (1) 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, freeholder's premium valuation (if they get one) and the lease extending fees for drafting the variation of the lease and completion. The costs must be reasonable, so if you are concerned that your freeholder's lease extension costs are unreasonable then you can look to get the costs reasonableness determined. If you think your freeholder's costs are unreasonable then read this article - How to prove your freeholder's costs are unreasonable

Are you liable for the reasonable costs at the Tribunal?

The leaseholder is not liable to pay the freeholder's costs at Tribunal as the act states:

(5) A tenant shall not be liable under this section for any costs which a party to any proceedings under this Chapter before a leasehold valuation tribunal incurs in connection with the proceedings.

Lease Extension Valuation

Lease Extension Solicitors
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 classic grey area but a good rule of thumb is to get 3 surveyors' quotes for a leasehold extension valuation and take an average as a benchmark for deciding whether your Freeholder's declared costs are reasonable here.

We charge £600 Inc VAT for our RICS surveyors and give an exact cost to pay the Freeholder for the lease extension. The charge includes visiting the property, calculating a current market valuation and an estimate of what the property will be worth if the lease is extended.

The Freeholder can get their own independent 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 valuation.

Want a Lease Extension Valuation? Get one you can trust from an expert RICS valuer - £600 incl. VAT - call 0333 344 3234


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, which is entirely unnecessary. Should the Notice be found to be incomplete, it can be ruled invalid.

The serving of the Section 42 Notice fixes the valuation date at the day of the Notice. The valuation date is when the variables affecting the lease 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.

Question
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.

Want a Section 42 Notice? Serve it correctly with expert help from our lease extension solicitors for £600 incl. VAT - call 0333 344 3234


Cost of Lease Extension

Negotiations

Range from £480 to £1,200 payable to solicitor/surveyor
The most common snagging issue which accompanies a lease extension is the negotiation of the cost. You have to have a surveyor and a solicitor working in tandem to negotiate your lease extension survey and to give reasons for any assumptions included within it.

It's common for lease extension solicitors costs to work out according 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 fee they can both agree on.

Lease Extension Conveyancing

Range from £700 to £1,200 payable to solicitor/surveyor
Once you and the Freeholder have agreed the premium required for you to be granted a lease extension, 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. 

The Lease Extension Conveyancing costs between £700 up to £1,200 depending on the solicitor chosen. We offer fixed solicitor's fees for this process and charge £720 Inc VAT.

Question
You must pay the reasonable costs of the Freeholder's solicitor fees

Want Lease Extension Conveyancing? Fixed fee charge of £720 incl. VAT - call 0333 344 3234


Lease Extension Premium

NB Mundy v. the Sloane Stanley Estate and the Court of Appeal

The Court of Appeal is set to rule on this long-running lease extension case re: lease extension premiums and many commentators have stated that this may result in a significant reduction in premiums payable.

Therefore the figures below may, depending on the Court of Appeal's ruling, be subject to change: this must be taken into account. You should always consult an appropriately-qualified expert for advice if you are looking to find out how much your premium is likely to be if you yourself are seeking a lease extension.

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

The rule of thumb is that the less years there are left on the lease then the higher the lease extension premium will be. The table below gives a rough guide, in terms of percentage of unimproved end value, to what you might have to pay as a lease extension premium with the number of years remaining on the lease varying.

It's clear that below 20 years left on a lease, rises are steep. Getting an accurate lease extension calculation for your premium is paramount when negotiating with your Freeholder. In accurate calculations 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 Fee. When a Lease is extended, it adds value to the property, sometimes this can be a substantial amount. Under the 1993 Leasehold Reform Act, the landlord is entitled to half of the increase in the value of the property when a

Lease term left Percentage of unimproved end value
5 years 82%
10 years 69%
14 years 57%
20 years 45%
30 years 34%
40 years 25%
50 years 18%
60 years 13%
70 years 8%
80 years 5%

Our team of specialist lease extension solicitor and surveyors provide the full lease extension service at highly competitive prices.

Call us on 0333 344 3234 or email us at help@samconveyancing.co.uk to get a fixed quote.

*RICS Valuers - Experienced Solicitors - Fast Delivery - Competitive Prices - 0333 344 3234