Extending your lease is an investment in your home: in most cases it will increase the value of your flat more than the cost of the lease extension.
You can either pay for the cost of the lease extension out of savings or in most cases your mortgage lender will be more than happy to extend your mortgage to pay for the lease extension.
The cost of the lease extension has three parts:
Part 1: The “Premium”
This is the amount you have to pay your freeholder to extend your lease.
This cost is negotiated with your freeholder as part of the process but it is based (loosely) on a formula so they can't simply name their price.
The day the lease on your flat drops below 80 years you have to pay an extra cost as part of the premium - and it can be hefty! For this reason you should start your lease extension before it gets to this point.
For a £200,000 flat with 90 years on the lease the Premium could be around £3,000.
Often freeholders start with a very high price, but this can always be negotiated down.
Part 2: Your Freeholder’s ‘reasonable’ fees.
As you are obliging your freeholder to give you a lease extension, the law insists you have to pay their fees which includes their valuation fee and legal fees.
For a low-value flat with a lease over the 80 year mark this can be a few hundred pounds but for high-value or short-lease flats it might be more. If the freeholder tries to charge too much, its fairly easy to challenge them to keep these costs under control.
Part 3: Your Own Costs
When you do a lease extension you need to get someone to do the legal work, and to ensure you get the best deal on the premium you will also want someone to do a valuation and negotiate fiercely with the freeholder too.
To give an indication, we offer a fixed fee of £1,950+VAT to complete the work from instruction to completion, which includes the cost of valuation, negotiation and the legal work.
In some cases, you might need to apply to tribunal to get them to decide how much your premium should be. This does cost more, but it is fairly unusual as the freeholders have to pay too.