Should I accept my freeholder’s informal lease extension offer?

Linz Darlington | January 2022

Have you been contacted directly by your freeholder with an opportunity to extend your lease?

The deal might seem attractive and may even appear cheaper than an estimate you’ve received for a formal lease extension.

This might not be a bad thing

It’s possible that this isn’t a bad thing and your freeholder is suggesting a deal that’s a win-win for both you and them.

But it’s probably is not a good thing for you

Most freeholders are unlikely to offer you a deal which leaves them out of pocket. After all, the vast majority of freeholders are investors who want to make money.

But if the price is right, how can this be?

Not all lease extensions are equal. The bullet points below compare the informal and formal.

An informal lease extension

  • tends to only increase your lease by a few years
  • can increase your ground rent, now or in the future
  • can sign you up to new charges or fees
  • can be withdrawn at any point by your freeholder

Read in more detail about the risks of informal lease extensions.

A formal lease extension

  • will increase the length of your lease by 90 years
  • will reduce your ground rent to £0
  • won’t allow the freeholder to introduce new fees or charges into your lease
  • follows a formal timetable where you’re protected

Considering an informal deal

At best, an informal lease extension can be a win-win for both parties. At worst you can end up in a situation that is worse than having a short lease or even make your flat very hard to sell.

If you are considering an informal lease extension you should ask:

  • how many years will be added to the lease?
  • how much the ground rent will be?
  • when and how much any ground rent increases will be?
  • whether any additional terms will be added to the lease?

Please consider how this compares with a formal lease extension and feel free to ask us what we think of the informal terms you’ve been offered.

Find out more about our lease extension specialists.

Start your lease extension today

Article author photo

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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