What is a leasehold extension?

A leasehold extension is the process of extending the lease term of a property held on a leasehold basis. It helps maintain the property's value and desirability. Leasehold extension legislation allows leaseholders to extend their lease, ensuring the property remains attractive for sale or mortgage purposes.

How long is a leasehold extension ?

The length of a leasehold extension can vary depending on the jurisdiction and specific circumstances. In some countries, such as the United Kingdom, leasehold extensions are typically granted for an additional 90 years beyond the remaining term of the existing lease. However, it's important to note that leasehold extension regulations can differ, and it's advisable to consult local laws or seek professional advice like leasehold valuations for accurate information regarding leasehold extensions in a specific jurisdiction.

What are the benefits of lease extension ?

Extending the leasehold of a property offers benefits such as increased property value, improved marketability, easier access to mortgage financing, peace of mind and security, the avoidance of escalating costs, and more control over property management.

What happens to leasehold property after 99 years ?

After 99 years, the leasehold property typically reverts back to the freeholder, unless the lease is extended by the leaseholder. The ownership of the property, along with the land it is built on, returns to the freeholder once the lease expires. As a lease approaches its expiration, the property’s value may decrease, making it more challenging to sell or mortgage. It is advisable for leaseholders to consider extending their lease well before it reaches the 99-year mark to maintain the property’s value and their ownership rights.

Why choose leasehold Valuations for Lease extension or Buying Freehold ?

1. Fair Price: A leasehold valuation ensures you pay a fair price for a lease extension or freehold purchase.2. Increased Property Value: Extending the lease or buying the freehold can potentially increase your property’s value.3. Cost Savings: Accurate valuation helps minimise future costs like ground rent.4. Stronger Negotiation: A valuation report strengthens your position during negotiations with landlords.5. Legal Compliance: Valuations ensure you meet legal requirements for lease extensions or freehold purchases.6. Future Planning: Valuations help you plan for selling or passing on the property to future generations.7. Expert Advice: Engaging a valuer provides access to their expertise and guidance.8. Mortgage Support: Valuation reports improve your mortgage opportunities for lease extensions or freehold purchases.

How much does it cost to renew a leasehold ?

The cost of renewing a leasehold in the UK can vary depending on various factors, such as the property value, the length of the renewal term, and any negotiations between the leaseholder and the freeholder. Unlike extending a lease, which typically involves paying a premium to the freeholder, renewing a lease generally involves paying a nominal fee known as a “peppercorn rent” or a small percentage of the property value.The exact cost of renewing a leasehold will depend on the specific terms agreed upon between the parties involved. It is advisable to consult with a solicitor or a licenced conveyancer who specialises in leasehold matters to get an accurate estimate of the costs involved based on your particular situation.

Q. How much does it cost to extend a leasehold in uk ?

The cost of extending a leasehold in the UK can range from a few thousand pounds to tens of thousands of pounds, depending on factors such as the remaining lease length, property value, and negotiated terms with the freeholder. Additional costs include legal fees, valuation fees, and disbursements such as Land Registry fees. It’s recommended to seek professional advice for an accurate estimate based on your specific situation.

Who Should Pay for a Lease Extension: Buyer or Seller?

June 27, 2024

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When extending a lease on a property, a common question arises: who should bear the cost of the lease extension, the buyer or the seller? The answer depends on various factors, including the terms of the sale agreement, negotiations between the parties, and local customs. In this blog, we will explore the considerations and typical practices regarding who pays for a lease extension.

Understanding Lease Extensions

A lease extension involves extending the term of an existing lease on a property, which can add significant value by providing longer tenure and potentially avoiding the pitfalls of a short lease. Extending a lease often requires negotiating with the freeholder and can incur substantial costs, including legal fees, valuation fees, and possibly stamp duty.

Key Considerations

Property Value and Marketability: Properties with short leases are generally less valuable and harder to sell. Extending the lease can significantly enhance the property’s marketability and value.
Negotiations and Agreements: Whether the buyer or seller pays for the lease extension is typically determined during the negotiation phase of the property sale. The outcome often depends on who benefits more from the extension.
Local Market Practices: Local real estate market practices and customs can influence who traditionally pays for the lease extension.

Common Scenarios

Seller Pays for the Lease Extension
- Pre-Sale Extension: Often, sellers extend the lease before putting the property on the market. This makes the property more attractive to potential buyers, who prefer properties with longer leases.
- Higher Sale Price: The seller can often command a higher sale price for the property with an extended lease, which can offset the cost of the extension.
Buyer Pays for the Lease Extension
- Lower Initial Purchase Price: The buyer might negotiate a lower purchase price to account for the cost of the lease extension. This can make the property more affordable initially.
- Buyer’s Control: The buyer can negotiate the terms of the lease extension according to their preferences and financial situation.
Shared Costs
- Split the Cost: In some cases, the buyer and seller agree to share the cost of the lease extension. This arrangement can make the deal more appealing to both parties, especially in a balanced market.

Practical Examples

Seller’s Perspective
- If a seller owns a property with a lease of 70 years remaining, extending the lease to 99 or 125 years can make it more appealing to buyers. The cost of the extension may be recovered through a higher sale price.
Buyer’s Perspective
- A buyer interested in a property with a short lease might negotiate a lower purchase price, planning to extend the lease themselves after purchase. This allows the buyer to manage the extension process and terms directly.

Conclusion

Determining who should pay for a lease extension—whether the buyer or the seller—depends on various factors, including negotiation outcomes, market conditions, and specific circumstances surrounding the sale. Sellers often opt to extend the lease to enhance the property’s value and marketability, while buyers might prefer to handle the extension themselves to control the terms. Sometimes, a shared cost arrangement is the best compromise for both parties.

If you’re navigating the complexities of lease extensions or freehold purchases, expert guidance can make a significant difference. At Leasehold Valuations, we specialise in providing comprehensive services for lease extensions and freehold purchases. Our experienced team can help you understand your options, negotiate favourable terms, and ensure a smooth process Contact us today.