How long should I extend my lease by?

Linz Darlington | May 2024

The answer is: to anything above 150 years.

It is generally considered that a lease of 100 years essentially represents full market value – i.e. buyers aren’t going to pay more for years above and beyond this point.

If you have a lease of 150 years, it means you can own the flat for the better part of a lifetime (say 50 years) and it will still have a long lease at the end.

Fortunately, under the Leasehold Reform Housing and Urban Development Act 1993, you can add 90 years on top of your current lease. So, if you have 60 years now, you’ll end up with 150 years or more once you’ve extended.

This article explains why lease extensions shorter than 90 years are a bad thing.

It also explains why longer lease extensions by 990 or 999 years don’t add any more value than a 90-year extension. Certainly, they are not worth paying more for!

Why are short lease extensions a bad idea?

Until fairly recently new leases were commonly no longer than 99 years. No one seems to know exactly why, but this term represented a period far longer than most lifetimes.

As property has got relatively more expensive and people live longer, homeowners have increasingly seen flats as not only a roof over their heads, but also as their pension and something to pass to their descendants.  

Equally, mortgage companies are increasingly reluctant to lend on flats with leases below 70 or 80 years – particularly for longer mortgage terms. This is also because when a lease drops below 80 years, it gets a lot more expensive to extend.

So, if you extend your lease back up to just 99 years, within two short decades it won’t be considered long anymore, and you’ll have to extend again. We are constantly doing lease extensions on leases which were previously bumped back up 99 years in the early 2000s – but now need doing again.

Obviously if you extend back up to 125 years, not 99, this gives you a fair bit more breathing room – but give it a few decades and the same problem arises.

But isn’t a short extension cheaper?

Imagine a flat with just over 80 years left on the lease which is worth £200,000.

A 90-year statutory lease extension should be about £4,000.

You’d be forgiven for thinking that a lease extension for half the time (45 years) would be half the amount (£2,000). But actually, this isn’t true.

Money now is worth more than money in a year's time - because you can put it in the bank and it will grow.

Accordingly, the cost of buying each additional year diminishes the further into the future that year is.  

Put it this way a 45-year extension on the flat above should be about £3,600 – or only £400 less than a 90-year extension.

Is a 999-year lease or a 990-year extension better than a 90-year extension?

Sometimes you see flats advertised with 999-years (or more) left on their leases.

Usually this is because these flats have a share of freehold or have been let on very modern leases. Some of the leases are quite toxic - and sign the owners up to nearly a thousand years of index-linked ground rent!

Equally, when the Leasehold and Freehold Reform Act comes into force (expected 2025 to 2026) you will be able to extend for an additional 990 years, rather than 90.

It’s tempting to think that a long lease is better, but that isn’t really the case. I am prepared to concede that if a buyer can choose between two identical flats – one with 150 years remaining and the other with 999 years – they’ll pick the second flat.

But this isn’t how the housing market works in practice. Buyers have a limited number of available properties. So long as the flat has lease over a hundred years or so, they’ll care more about the kitchen or location than an extra millennium on the lease.  

You don’t need to extend again:

If you’ve got a long lease of above 150 years, you don’t need to extend just because you could have a longer term.

Buyers won’t pay more for the extra years and mortgage lenders are never going to consider a lease short if it will have over 100 years at the end of the mortgage term.

If you did extend again, it should be very cheap:

If you added an additional 990 years on a £200,000 flat with 150 years remaining on the lease, the additional premium would be about £135.

While it really isn’t necessary, if you really want to do another lease extension, you can always do another one in the future…

The lease is going to be redrafted over the decades anyway:

We frequently review leases from the mid-1970s which are written in legalese and are very dated. For example, I recently read one which prevented the occupier from keeping pigs, and playing a gramophone at night - in a first floor maisonette!

Even if you have a lease of 150 years, you can assume that solicitors will have to revisit it during that period to make sure it is fit for purpose.

Will a 990-year extension be more than a 90-year extension?

Under the Leasehold and Freehold Reform Act 2024 – once it is enacted – you should be able to do a longer extension of 990 years.

For the reasons outlined in this article, this should not be more expensive than a 90-year extension.

However, having abolished marriage value, we’re concerned that the government might even things up by tweaking other parts of the calculation to make lease extensions more expensive. They could then justify the extra cost by arguing that the extensions is 990 years, not 90, and worth more accordingly. As we've said, this wouldn’t be true.

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In summary, 150 years is plenty for a lease and enough that if you've done it once you won't have to do it again.

Shorter lease extensions should be avoided, and longer extensions are unlikely to be worth the extra money.

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Linz is the CEO and co-founder of Homehold. He’s always looking at how we can improve our service and better support you through the lease extension process. If you have any questions about your lease he’d be delighted to help.

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