Can a freeholder refuse to extend a lease?

When buying a leasehold property, its value will depend on how many years are left on the lease. The shorter the remaining time, the less the property will be worth. If you own or are considering buying a leasehold property, understanding your right to extend your lease is essential to protect the value of your investment.

Whether the freeholder legally has to grant you a lease extension or not largely depends on how long you have occupied the property. If you have held the lease for 2 years or more, you will normally have a statutory right to extend the lease.

If you have occupied the property for less than 2 years, the freeholder can refuse to extend the lease, but it is often possible to negotiate a lease extension even so, although you may have to pay more to do so.

How statutory lease extensions work

Leaseholders’ legal right to extend their leases after 2 years occupancy is governed by the Leasehold Reform Housing & Urban Development Act 1993. This gives leaseholders the right to extend their lease by up to 90 years in exchange for a premium paid to the freeholder, the value of which is based on a set formula.

If you are entitled to a statutory lease extension, your freeholder should be willing to agree the extension without the need for formal proceedings under the Act. However, if they try to refuse or do not respond when contacted, you may need to have your solicitor serve a Tenant’s Notice on them to begin formal proceedings.

Enforcing your statutory right to a lease extension can take longer and may cost you a little more in legal fees, but if you are eligible under the Act, your landlord cannot legally refuse you an extension.

When to extend the lease on a leasehold property

One of the most important things to understand about leasehold property, is that the value of the lease will start to decrease significantly if it falls to 80 years or less. This is because once the lease reaches this point, you will have to pay 50% of the ‘marriage value’ when you extend the lease.

Marriage value is how much the lease’s value will increase due to the lease extension, which can be significant. This means that if you allow the lease to fall to 80 years or less, getting an extension can become much more expensive.

When buying a leasehold property, you should therefore be extremely careful about anything with 83 years or less remaining on the lease. This is to allow yourself the 2 years required to become eligible for a statutory lease extension and enough to time carry out the lease extension process before you become liable for marriage value.

Get reliable conveyancing for lease extensions

Bird & Co Solicitors is a long-established law firm offering conveyancing services for properties across England and Wales from our 3 offices in the East Midlands.

We are highly experienced in conveyancing for all types of residential property transactions, including lease extensions and lease enfranchisement. Our conveyancing solicitors can guide you through everything you need to know to ensure a smooth transaction and protect your interests. We are accredited by the Law Society’s Conveyancing Quality Scheme reflecting the high quality of our residential property services.

To find out more about our conveyancing services, call us today on 01476 591711 or use our contact page to find details of your nearest Bird & Co office.