Leasehold property ownership is common across England and Wales, particularly in cities and towns where flats and converted buildings make up a large proportion of the housing market. As leases grow shorter, leaseholders often become concerned about falling property value, increasing costs and the potential difficulty of selling or re-mortgaging their home. A statutory lease extension can resolve these issues, but many people are unsure about what it will cost and how the process works.
At Blackstone Solicitors, we act for leaseholders and landlords in statutory lease extension matters, providing clear advice on valuation, negotiation and procedure. This article explains the likely costs involved, the factors that influence them and the steps you will need to take.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Statutory Lease Extensions, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What Is a Statutory Lease Extension?
Rights Under the Leasehold Reform Legislation
A statutory lease extension is a formal legal process available to qualifying leaseholders under the Leasehold Reform, Housing and Urban Development Act 1993. It allows leaseholders of flats to extend their lease by an additional 90 years while reducing ground rent to a peppercorn. This makes the property more attractive to buyers and lenders while helping the leaseholder protect their long term financial interest.
The statutory route provides certainty, because both sides must follow a strict legal framework. However, it also involves costs that must be understood before beginning the process.
Why Lease Extensions Become Necessary
The Impact of a Short Lease on Property Value
Many leaseholders are surprised to learn how quickly a short lease can affect the value of their home. Once a lease falls below 80 years, the cost of extending it rises sharply. This is due to something known as marriage value, which becomes payable as soon as the lease drops below this threshold.
A short lease can also cause practical problems. Mortgage lenders often refuse to lend on properties with fewer than 70 years remaining, and even those with slightly longer leases can encounter difficulties. For these reasons, homeowners often choose to extend their lease while it is still relatively long, as this reduces the overall cost.
What Does a Statutory Lease Extension Cost?
Understanding the Main Elements of Payment
The cost of a statutory lease extension can be divided into several components. It is important to account for each of them to get an accurate picture of what the process will involve.
Premium Payable to the Freeholder
This is the central cost. The premium is the amount the leaseholder pays the freeholder to compensate them for the loss of ground rent and for the extension of the lease. The premium is based on a valuation formula set out in legislation. It considers:
- The remaining term of the lease
- The ground rent and how it increases
- The value of the property
- The value of the property once the lease is extended
- Whether marriage value applies
If the lease is above 80 years, no marriage value is payable. Below 80 years, marriage value can significantly increase the premium.
Leaseholder’s Professional Fees
To protect your interests, you will need to instruct specialist professionals. These typically include:
- A surveyor experienced in leasehold valuation
- A solicitor to manage the statutory process
- Additional legal work once the extension is agreed, such as drafting the new lease
Surveyors provide valuation advice and assist in negotiating the premium. Solicitors draft and serve notices, manage deadlines, liaise with the landlord’s representatives and ensure compliance with statutory requirements.
Landlord’s Reasonable Costs
The leaseholder is legally required to pay the landlord’s reasonable professional fees. These usually include:
- The freeholder’s valuation report
- The freeholder’s legal fees for reviewing and responding to notices
- The landlord’s costs in drawing up the new lease
While these costs must be reasonable, they can vary depending on the complexity of the case and the approach taken by the landlord.
Tribunal Costs (If Required)
If the parties cannot agree the premium, either side can apply to the First Tier Tribunal for a determination. Tribunal fees are usually modest, but each side will need to cover its own legal and valuation costs for preparing and presenting the case. In most situations, matters settle before reaching a hearing.
Factors That Influence the Premium
Why No Two Lease Extensions Are Identical
The premium payable can vary widely depending on several factors.
Lease Length
This is the biggest driver of cost. A longer remaining term generally leads to a lower premium. Once a lease falls below 80 years, marriage value becomes payable. This can dramatically increase the overall cost.
Property Value
Higher value properties attract higher premiums. The freehold interest becomes more valuable as the underlying property value increases.
Ground Rent
A high ground rent or a rent that increases over time will increase the premium, because the landlord is being compensated for the loss of future income.
Local Market Conditions
Leasehold valuation involves market assumptions and comparable evidence. In areas where property values are rising quickly, premiums may be higher.
Negotiation
Even with statutory rules in place, there is room for negotiation. Skilled surveyors and solicitors can often help secure more favourable outcomes. Poor negotiation may result in the leaseholder paying more than necessary.
How the Statutory Process Works
The Stages You Will Need to Complete
A statutory lease extension follows a set legal procedure. Understanding the steps can help you prepare and stay ahead of key deadlines.
- Checking Eligibility
Most leaseholders qualify if they have owned the property for at least two years and the lease was originally granted for more than 21 years.
- Instructing a Valuer
A specialist valuer will calculate the likely premium and advise on the figure to include in the formal notice. Their input is essential for a strong negotiating position.
- Serving the Section 42 Notice
Your solicitor will prepare and serve the tenant’s notice on the freeholder. This notice begins the statutory process. It must be drafted accurately and include the proposed premium.
- Payment of a Statutory Deposit
Once the landlord receives the notice, they can request a deposit. This is usually 10 per cent of the premium stated in the notice or 250 pounds, whichever is greater.
- Freeholder’s Response
The landlord must respond with a counter notice before the statutory deadline. This notice will state the premium they believe is payable and any other terms they propose.
- Negotiation
Both parties negotiate with the support of their surveyors. Most cases settle at this stage.
- Completion of the New Lease
Once terms are agreed, solicitors draft the new lease, register the extension and complete the transaction.
- Tribunal Application (If Necessary)
If negotiations stall, either party may apply to the tribunal. This must be done within a strict deadline after receiving the counter notice.
How Long Does the Process Take?
Managing Expectations and Avoiding Delay
A statutory lease extension typically takes between three and eight months, depending on how quickly both sides respond and negotiate. Delays can occur if valuation issues are complex or if the landlord is slow to engage. A well organised legal team can help keep matters moving.
How to Reduce Costs
Practical Steps for Leaseholders
There are ways to manage and reduce statutory lease extension costs. These include:
- Acting before your lease drops below 80 years
- Using an experienced surveyor who understands local market conditions
- Choosing a solicitor who handles lease extensions regularly
- Providing all documentation promptly
- Avoiding unnecessary disputes
- Considering both statutory and informal routes, then choosing the most cost effective option
Early advice can prevent surprises later in the process.
Typical Cost Ranges
What Leaseholders Should Expect
Costs vary, but leaseholders commonly budget as follows:
- Premium: depends entirely on lease length and property value
- Leaseholder’s valuation fees: several hundred to a few thousand pounds depending on complexity
- Leaseholder’s legal fees: usually in the region of a few thousand pounds
- Landlord’s valuation and legal fees: similar range, though payable by the leaseholder
- Tribunal costs: additional if required
While statutory lease extensions involve several expenses, they also add significant value and protect the long term investment.
Why Choose Blackstone Solicitors?
Trusted Lease Extension Specialists in England and Wales
At Blackstone Solicitors, we provide clear, practical and strategic advice throughout the statutory lease extension process. Clients choose us because:
- We offer specialist experience in leasehold law
- We provide transparent and realistic cost estimates
- We manage deadlines carefully
- We work closely with skilled valuers
- We negotiate firmly to reduce the premium where possible
- We protect your interests at every stage
Our aim is to make the process as smooth as possible while securing the best outcome for our clients.
Speak to Blackstone Solicitors Today
If you are considering extending your lease or want a clearer understanding of the costs involved, our solicitors are ready to help. We advise leaseholders and landlords across England and Wales and can guide you through the statutory process with confidence and clarity.
Contact Blackstone Solicitors today to discuss your situation and obtain tailored advice on statutory lease extension costs.
How we can help
We have a proven track record of helping clients with statutory lease extensions. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
Deciding when (or whether) to incorporate, what kind of ownership
How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of a statutory lease extension. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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