Why are lease extensions now so common?

Lease extensions have become an increasingly common property law issue in the UK in the last decades, and the issue commonly arises, often to the surprise of a seller of a flat, when they come to sell their property.

The issue is largely caused by the fact that, once a lease has less than 80 years left to run, the freeholder would be entitled to charge more as a premium to extend the lease under statutory provisions. Once the lease has less than 80 years and very technical calculation comes into play, strangely known as marriage value.

This is one main reason why it is worth extending a lease before it gets down to 80 years. The other reason is that whilst 60, 70 or 80 years is still a long time, mortgage lenders do consider that a lease will be less valuable and represent a lending risk if the lease gets down to anywhere such as 50-60 years left to run, and many will not lend money to a buyer if the lease has a term left off less than typically 50-60 years.

The issue of lease extensions has become so much more common also because a lot of houses were converted into flats in the last 30-40 years, far more than was previously the case. Typically, those conversions created leases with a length of 125 years, considered entirely satisfactory in terms of length since, after all, such a lease term is well in excess of an expected lifetime. A lot of these leases are now approaching the 80-year term remaining, hence so many are being extended.

In relation to how much it will cost to extend a lease – well this varies, and most leases are extended by consent, as it’s in neither the freeholder or leaseholder interest to go through the lengthy statutory procedure, especially when there is rarely if ever, that much leeway as to what the lease extension should cost. It really depends firstly on whether the lease has left than 80 years, the value of the flat, but a typical amount, perhaps for a flat worth £250,000.00, would be about £8,000.00 plus legal and valuers fees, which may add another 3,000.00 plus vat to the bill.

Lease extension issues are likely to diminish in the future as most of the converted flats get extended. More modern leases in large developments tend to have a lease term of 999 years, so the issue doesn’t come into play!