Lawyers from London-based Osbornes Law say many leaseholders do not realise that they can reach out to the freeholder to negotiate, and are missing out on an opportunity to save time and money.
Amber Krishnan-Bird, solicitor from Osbornes Law, points out that when negotiating with the freeholder homeowners can tailor the length of the lease to their needs and save money on legal fees.
Krishnan-Bird said: “I have seen many times homeowners ask for a lease extension to be carried out, as they need to remortgage or sell their property, only for them to be shocked at how long it takes. The statutory process takes anything between six months and a year or longer so if you need to extend your lease then it is best to plan in advance.
“Many homeowners don’t realise that there is a much better option of reaching out to the freeholder and voluntarily negotiating a lease extension instead of going through the statutory process. This is also a lot quicker as it can be carried out in as little as a month. A leaseholder simply has to ask the freeholder if they are open to them extending their lease and on what terms?
“A lease extension through the statutory process must be for 90 years on the basis that the ground rent is nil, but under a voluntary negotiation you can change the terms. For example, if you are looking to sell a property and do not want to pay for the full lease extension of 90 years then you could extend it for a shorter period, saving you money. Agreeing terms before solicitors get involved will also save you money on legal fees. The leaseholder can of course refuse, but it is always worth asking before embarking on the statutory process.”
Leaseholders are legally allowed to extend their lease. But it the lease falls below 80 years then ‘marriage value’ kicks in, meaning extending the lease becomes much more expensive.
The second stage of leasehold reform – following the Leasehold Reform (Ground Rent) Act 2022 which came into force earlier this year – promises to scrap marriage value potentially wiping thousands from the cost of a lease extension.
Krishnan-Bird added: “Given the reforms, homeowners may be wondering if it’s better to wait before starting their lease extension. The problem is, we don’t yet know when, or if, the new legislation will come in. In the meantime, it will be difficult to sell or remortgage properties that are not extended while leases continue to run down and become more expensive to extend whilst you wait.
“Another thing many have asked is if you have a lease of less than 80 years is it worth trying to get a better deal with your freeholder by asking to split the marriage value 50/50, arguing that the freeholder will get much less if you extend the lease once the reforms are brought in? In my experience most freeholders are not budging on this, so you have a choice of extending your lease now or waiting in hope of reforms that may not happen.”