How much will it cost to extend my lease?
If you decide to extend your lease, you are likely to come across the following costs:
A compensatory payment to your landlord for him losing the value of his reversionary interest. This amount is usually calculated by looking at the value of his interest now and what is will be worth after your extension is granted – and may include the “marriage value” (see below) if you lease has less than 80 years left to run;
The landlord’s own reasonable legal fees and any other reasonable costs they incur;
The valuation fee for both yourself and your landlord (requiring the preparation of valuation reports by independent valuers); and
Your costs incurred in taking your claim to the Leasehold Valuation Tribunal in the unlikely event that you and your landlord cannot agree on the price to extend your lease or on the level of the landlord's reasonable costs payable by you.
What is the marriage value?
The marriage value is a one-off fee incurred by a leaseholder who extends their lease with less than 80 years left to run. It is an amount calculated using a valuation of the landlord’s reversionary interest and is payable to the landlord if they grant the extension. In light of this, it is smart to make your application to extend before allowing the term of your lease drops below 80 years – so avoiding the need to pay the marriage value entirely.
Do I have to pay the price my landlord is asking to extend my lease?
No. You can get your own lease extension valuation done and use this as evidence of what a reasonable premium would be for the extension. If your landlord unreasonably refuses to negotiate on price, then eventually you may have to refer the matter for independent determination by the Leasehold Valuation Tribunal (the LVT). You will, however, incur further costs in using the LVT and your Solicitor will normally seek to exhaust all other reasonable negotiation techniques before going to the LVT. It's worth noting that relatively few cases are referred to the LVT in the first place – and of those that do, a significant number actually settle prior to the hearing itself. Full LVT hearings are therefore relatively unusual in straightforward lease extension applications.
I’m selling my flat and want to extend my lease – can I pass on the costs to the buyer?
In most cases a buyer usually expects the seller to pay for the necessary expenses of a leasehold extension. However there is no reason why these costs cannot be negotiated as part of the purchase price. You are only able to assign the right to extend after having served the s.42 Initial Notice. Provided you can find a buyer who wants to go ahead with the lease extension, and is prepared to pay to extend the lease, you may well find that your flat commands a higher sale price. This is particularly the case if your lease has between 80 and 82 years left to run – remember that the new purchaser will be unable to apply for their own lease extension without owning the property for 2 years – so the only way for them to obtain a cheaper lease extension (by avoiding the need to pay the marriage value), is for you to make an application before the sale of the flat (provided of course that you, have owned the flat for 2 years already). Your solicitor will be able to provide you with more information about this process – but if you're thinking of doing this, it's important that any conveyancing solicitor you choose has a detailed understanding and experience of lease extension work.
Will I have to pay rent for the extended years of my lease?
No. Normally the new terms of the extended lease state that ownership will be for a ‘peppercorn’ rent ie the ground rent will be small or nonexistent. When negotiating an extended lease, you are also able to renegotiate certain terms of the lease with your landlord eg maintenance costs and the right to sub-lease.
For advice about how lease extension can increase the value of your flat, contact us today
For FREE initial phone advice about extending a lease: