Leasehold reform: Should I extend my lease now or hang on?

On behalf of Attwaters Jameson Hill posted in Residential Property on Thursday, March 7th, 2024

Following the introduction of the Leasehold Reform (Ground Rent) Act 2022, which restricts ground rents on new leases to a ‘peppercorn’ – i.e., nothing – the second phase of the government’s promised reforms to the leasehold system is currently on its way through parliament.

The Leasehold and Freehold Reform Bill was announced in the King’s Speech in 2023 and was introduced to the House of Commons in the November of that year. The proposals include:

Making it easier and cheaper for leaseholders to extend their lease or buy the freehold of their building
Abolishing the marriage value, which is currently charged on lease extensions where the lease has fewer than 80 years to run
Increasing the term of a standard lease extension from 90 years to 990 years, with no ground rent
Leaseholders will no longer have to wait for two years before they can extend their lease
More transparency over leasehold service charges
Introducing a maximum time limit and fee for freeholders to provide leaseholders with information about their property when they are selling
Making it easier for leaseholders to challenge poor practice
Banning the sale of new leasehold houses.

Extend now or wait for reform?

Completely understandably, many leaseholders are wondering if they should wait until the reforms have been introduced in order to extend their lease. The answer is that it completely depends on your circumstances and the number of years left on your lease.

Once the time remaining on your lease drops below 80 years, it becomes much more expensive to extend your lease and more difficult to secure mortgage finance on your property. Therefore, whether or not it makes sense to wait depends on how close you are to the 80-year mark.

If you are at 80-81 years, then you should consider extending your lease now. There is no guaranteed timeline for the introduction of the proposed reforms and, if you let your lease term fall below 80 years, your lease extension will become much more expensive.

If you have more than 80-81 years to go, you can probably afford to wait – for now. You’ll have to keep a close eye on the progress of the proposed legislation and make a judgement call when your lease enters the 80-year ‘danger zone’.

If you have fewer than 80 years remaining on your lease, then waiting could mean a cheaper lease extension if the reforms are passed, as the marriage value will hopefully have been abolished. However, having a property with a short lease can make remortgaging and selling your property difficult. If your mortgage deal isn’t due to expire for a while and you have no plans to sell up, then waiting could make sense.

All of the above will depend on your individual circumstances and what your plans are for the property. If you already own the property, are you planning on selling or remortgaging? If you are selling, is the buyer requiring a lease extension? If you don’t already own the property and are considering making an offer – where does the current lease fall in terms of the categories set out above?

Take legal advice

The UK leasehold system is extremely complicated and each leaseholder’s situation will be different. It’s therefore vital to take legal advice before any decision is made to go ahead with or delay your lease extension.

Our Leasehold Enfranchisement team has decades of experience in all aspects of leasehold law, and can provide expert advice tailored to your circumstances. Should you decide to extend your lease now, they can support you through the entire process from start to finish and negotiate with your freeholder to ensure you get the best possible premium.

To get in touch, please call our Head of Leasehold Enfranchisement, Salvatore Amico, on 0203 871 0039 or email salvatore.amico@attwaters.co.uk.