Should I Wait to Extend My Lease?

Should I Extend My Lease or Wait?

If you own a leasehold property, you’re probably wondering whether to extend your lease now or wait for the much-publicised reforms. The answer isn’t straightforward, timing your extension could save (or cost) you thousands. Here’s what you need to know to make an informed choice.

What is Leasehold and How Does it Differ from Freehold Ownership?

There are only 2 main forms of property ownership possible in England and Wales (this article covers English law only as the Scottish system is slightly different)  – “Lease” also known as a “tenancy” and a “freehold” which is absolute ownership. If you have a lease it means that you will have an “immediate landlord” who will either be the owner of the freehold within which your lease is situated, or a “superior leaseholder” who may hold a lease with the freeholder themselves and would have “sublet” the flat to you.

The main difference between the two forms of property ownership is that with a lease, there is a finite amount of time during which you can “enjoy” the property (i.e. occupy it yourself, or collect income from licencing or sub letting it) typically 99 years from the start date in the case of older leases, although 999 years is becoming more common nowadays.

Most of the time, unless a new build, if you buy a flat you will actually be taking an “assignment” (i.e. transfer) of an existing lease and so you will only have it for the “remaining term”, i.e. however much is left, since the original lease was granted.

The 80 Year Rule

The matter is further complicated by the fact that most institutional mortgage lenders are reluctant to lend money secured on flats with less than 80 years left and that then has a knock-on effect on both saleability and value of the flat. The law has stepped in to allow leaseholders of residential flats in this situation to have a “right” it extends their lease by up to 90 years, plus the remaining term. So, if your lease has 81 years left to run, the extension will give you a lease with of 170 years left to run. This will boost the value back up. However, where the lease has less than 80 years to run, there could be a significant “price” to pay the landlord for the extension, and usually you need to also pay your own legal and valuation fees and those of the landlord. This can be £50,000 or more depending on the property type, value and remaining term. However, under the old law, you needed to be the owner of the lease for more than 2 years (to stop opportunistic behaviour “snapping up” of flats with short leases with a view to “flipping them” for quick profit – which could even if temporarily take the property away from the of the stock the ownership pool).

The government has seen this as “unfair” for some time and parliament has approved some much-needed reforms, as set out below however it is important to get it right as it could in some cases cost more, not less, to wait for the new law to fully come into force.

When Will the Changes Happen?

While leasehold reform is firmly on the political agenda, the Leasehold Reform Act has not yet fully come into force (although some parts have such as the abolition of a previous requirement to have owned the flat for 2 years before being able to extend using the statutory formula). The new government has pledged swift action, but major changes will likely roll out gradually, with further industry consultations required. Many legal experts predict that the majority of significant reforms will not take effect until 2026 as the Government consultation on the premium calculation is not taking place until this summer. If you have an urgent reason to act—such as an upcoming sale or remortgage—you should factor in these delays.

Will the Reforms Make Lease Extensions Cheaper?

For many leaseholders, the reforms are expected to bring much-needed relief, particularly for those in the following situations:

• Lease under 80 years: The anticipated abolition of “marriage value”—a costly element that inflates the price of lease extensions—could dramatically reduce the price for shorter leases.
• High ground rent: The new rules aim to cap ground rent (often at 0.1% of the property value) in lease extension calculations. This could lower costs for those with disproportionately high ground rent clauses.

The government’s intention is clear: to make lease extensions more transparent and fairer. However, the final details (including precise valuation methods and rates) have yet to be confirmed, so there is still a degree of uncertainty.

Could Lease Extensions Become More Expensive?

It’s possible. The legislation does not spell out every detail. If the rates used for valuation (such as the “deferment rate” or capitalisation rates) are set less favourably, leaseholders with longer leases and minimal ground rent may end up paying more under the new regime than they would today. As ever with new legislation, there can be unintended consequences, and not everyone will benefit equally.

Should You Wait or Act Now?

Here’s a guide based on current knowledge:

• Lease between 80–82 years: Act now. Waiting risks your lease dropping below the 80-year mark, triggering the expensive “marriage value.”
• Lease under 80 years or high ground rent: Consider waiting if you can afford to, as you stand to benefit the most.
• Lease over 100 years: There’s less urgency. You may prefer to see how the reforms play out, but bear in mind that future costs could be higher or lower.
• Selling or remortgaging soon: Extending now may prevent complications with buyers or lenders, as some may be cautious about legal uncertainty.

Ultimately, your best course of action depends on your specific circumstances and risk tolerance.

You can of course extend your lease on any terms at any time if your “landlord” (the freeholder or superior leaseholder in some cases where there is an intermediate lease) consents, but in order to “force” the situation on the freeholder, you will need to rely on the so called “statutory route” which is through a procedure laid down in the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act).

Other Factors to Consider

• Market Volatility: Property market fluctuations could affect the overall value of your investment, so keep an eye on trends.
• Future Plans: Are you planning to stay long-term, or is a sale on the horizon? The timing of your extension could affect your saleability.
• Professional Advice: Leasehold law is notoriously complex. A misstep could be costly, so don’t rely solely on headlines or hearsay.

What Should You Do Next?

Given the complexities and evolving nature of leasehold reform, the smartest move is to seek bespoke legal advice. Every leaseholder’s position is unique, and the right solution for one person may not be best for another.

 

In Summary

If your lease is short or your ground rent is high, you’re likely to gain from waiting for the reforms. If your lease is edging close to the critical 80-year threshold, or you need to act quickly for personal reasons, it’s often wiser to extend now. Above all, don’t make assumptions—seek out expert advice before making your decision.

Take Action with Jonathan Lea Network

The Jonathan Lea Network specialises in guiding leaseholders through the maze of property law. Our experienced solicitors can review your lease, explain the likely impact of the reforms on your situation, and help you plan the most cost-effective way forward. Don’t leave your most valuable asset to chance—contact us today for a tailored consultation and peace of mind about your lease extension.

 

📞 Contact us today to discuss whether we can help you to extend your lease.

 

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.