What’s the Cost of Extending a Lease on a Share of a Freehold?
Extending the lease on your home can be an intimidating and costly process, but it doesn’t have to be. We’re here to help.
Whether you’re a leaseholder looking to extend your lease via your collective freehold, or a share of freehold owner looking to grant a lease extension to yourself or other residents of your block, there are a few key things you need to know about the process and associated costs.
So – what’s the cost of extending a lease on a share of a freehold?
The actual cost will differ on a case by case basis. However in this guide, we’ll cover the cost associated with extending such leases, how the process works, and what rights you have as a leaseholder or freeholder.
We will also discuss other important factors that need to be taken into consideration when considering whether or not it’s worth extending your lease, such as the comparative costs and benefits of acquiring a share of your freehold.
With all of this information at hand, you’ll be able to make an informed decision about what’s best for both yourself and your property. So let’s get started!
Lease Extension Basics
What is a lease extension?
A lease extension is when a leaseholder adds an agreed period of time to their lease, usually for a fee, in an agreement between themselves and their freeholder(s). Depending on the terms of the original lease and individual situation, the cost of an extension can vary greatly.
The process of extending your lease generally means that you will receive a new lease for a set number of years, up to 999 years in some cases, usually at a cost.
The leaseholder may be expected to pay the freeholders’ reasonable costs (including any surveyor’s fees) and a premium known as the ‘premium payable for the extended term’, which is generally calculated using an equation based on market value and other factors such as inflation.
Why might you need to extend your lease with a share of a freehold?
The main reason why people need to extend their lease with a share of a freehold is for sales and mortgages in freehold flats.
If a leaseholder has less than 999 years remaining on their lease length, it can be more difficult for them to sell or remortgage their property, as most mortgage lenders will not provide finance for properties with leases that have less than 80 years to run.
With a share of freehold lease extension, it can be easier to remortgage or sell a property as it increases the value of the property and decreases any perceived risk to lenders. Similarly, purchasing your property’s freehold along with other leaseholders in your building (if you haven’t already done so) can also increase your property value.
Recent developments in the property market have made it apparent that 999 year leases should be the standard for all real estate transactions, as anything less is considered to be inadequate.
As such, lease extensions are becoming increasingly common for those whose existing leases do not provide this level of protection, and are still an important consideration for those who own a share of a freehold, as a collective enfranchisement will need to grant such extensions.
Looking for some no-obligation advice on your best option? We can support you. Contact us today.
What is the Cost of Extending a Lease on a Share of a Freehold?
So – what’s the cost of extending lease on share of freehold? This number will vary from lease to lease, but you can use our Freehold Purchase Calculator today for an instant valuation on the cost of acquiring your freehold.
When the freehold ownership is enfranchised, you will essentially be granting a lease extension to yourselves. This means there is usually no premium cost payable for the extension itself other than the standard legal costs, valuation and land registration costs involved.
This is usually the case, though sometimes leaseholders get into a dispute about whether the premium was fairly split at the time, especially if flats have changed hands since. With this in mind, it is important to make sure that all leaseholders agree on the split of legal fees and other costs in advance of extending a lease.In addition, if there was a Participation Agreement in place when the property was collectively enfranchised, it can drastically reduce disputes in the future.
If you do not own a share of the freehold and are a leaseholder in a share of freehold property, then you may need to negotiate with the freehold owners in order to arrange a lease extension. Occasionally, you can do this via an informal lease extension without needing to pay a premium, although it is important that all parties agree on the terms of the agreement beforehand.
What is the Cost of Acquiring a Share of Your Freehold?
Above, we discussed how the cost of extending a lease on a share of a freehold without freehold ownership is usually much higher than with freehold acquisition. But what exactly is the cost of acquiring a share in your freehold and how does it match up to lease extension costs?
Well, the cost of acquiring a share in your freehold can vary considerably, depending on the size and nature of the property. Generally speaking, it is advisable to seek professional advice before beginning the process, as you will need to assess your legal rights and obligations under any existing lease and all the leases that may be created through collective enfranchisement.
Haven’t bought a share of your freehold yet? If you and other tenants in your property want to acquire your freehold and benefit from reduced leasehold extension costs, you might be wondering about the overall cost of freehold acquisition.
Our Freehold Purchase Calculator helps your collective enfranchisement gain an idea of their potential freehold purchase costs by providing an instant estimation of the value of their freehold.
How To Extend a Lease With a Share of a Freehold
- Gain permission from other freehold shareholders
If you don’t have support of all other freehold shareholders you may have to go through a drawn-out statutory procedure involving court proceedings, which isn’t impossible but is ultimately likely to cost you far more. For this reason, it is always best to ensure that all relevant parties are in agreement before beginning the process.
These are normally difficult discussions, but the freehold purchase experts at The Freehold Collective can help with this! Through our expertise, we can accurately assess the situation and advise on the best way to move forward in order to get everyone’s agreement.
- Appoint legal advisors
Once you have the support of all other freehold shareholders, it is then time to appoint legal advisors who will take on the responsibility of arranging and completing the enfranchisement.
It’s important that your legal advisors are experienced in leasehold and collective enfranchisement law, as they will be responsible for ensuring the smooth and successful transition of your freehold ownership.
- Produce a deed of surrender and re-grant or an entirely new lease
The majority of leases are extended by deed of surrender and re-grant, but an entirely new lease can be created for all leaseholders if the current lease is defective or needs updating to be inline with the other building leases.
Your solicitor will support you with this – but this is also a service that TFC provides. Our expert staff can help you create the right lease for your share of freehold property and ensure it’s legally compliant, as well as assist you throughout every other step in acquiring a share of the freehold.
- Finalise the lease extension process
You will then need to draw up and register the new lease and complete the necessary conveyancing. With Land Registry delays etc. this process can be drawn out, so it really helps to have a project manager involved.
This is another area where TFC can help – our project managers have years of experience helping leaseholders to purchase their freehold and can use this expertise to ensure that the process runs quickly and smoothly.
Once all necessary paperwork has been completed, you will be able to enjoy the benefits of a longer lease on your share of freehold property.
Need Support to Acquire a Share of Your Freehold?
The whole process of extending a lease with a share of a freehold may seem daunting, but our team is happy to guide you through every step of the way. Don’t hesitate to get in touch if you have any questions or concerns – we will do our utmost to make the whole process as easy and efficient as possible.
Contact us today to purchase your freehold and extend your lease with ease!
Cost of Share of Freehold Lease Extension FAQs
Do share of freehold lease owners pay ground rent?
Share of freehold flats usually have no ground rent when the freehold is owned by the leaseholders. If leaseholders do not own the freehold and just hold a leasehold title, they may be liable for ground rent to the third party or collective enfranchisement.
How do I extend the lease on my share of freehold flat?
Flat owners who have a short lease often look towards purchasing the freehold of their property in order to benefit from the reduced leasehold extension costs. By collectively enfranchising, flat owners are able to extend leases on their share of freehold properties with a significant reduction in costs compared to extending an individual lease.