A Guide To Leasehold Extensions

If you own a leasehold property, understanding how lease extensions work is essential, especially as your lease term starts to fall. A decreasing lease can affect your property’s value, mortgage options and future saleability, which is why many leaseholders choose to act before the lease becomes too short.

Julekha Nathani, Senior Associate in Conveyancing at our Market Harborough office, explains the two main routes to extending your lease, the key differences between them, what a Section 42 Notice is, and the costs you should expect along the way.

Over the years, I have advised many clients on leasehold extensions and one of the most common things I hear is that the process feels confusing at first. There are different routes available, different costs to think about, and unfamiliar terms. The good news is that once the process is broken down into plain English, it becomes much easier to understand.

Why extending your lease matters

A lease gives you the right to occupy a property for a set number of years. As those years run down, several issues can arise:

1. Property value decreases

Shorter leases usually reduce the value of a property and can deter potential buyers

2. Mortgage lenders may refuse lending

Most lenders become cautious when a lease falls below 80 years, and some may decline mortgage applications entirely

3. Marriage value may become payable

Once your lease drops under the 80‑year threshold, “marriage value” (an additional cost added to the lease extension which represents the increase in the property’s market value because of extending the lease) becomes part of the premium. This can significantly increase the cost of extending your lease

Because of these factors, many leaseholders choose to extend when the lease is around 85–90 years, rather than waiting until it becomes urgent.

Two ways to extend your lease: statutory route and non-statutory route

There are two main routes to extend your lease: the statutory route and the informal (non‑statutory) route. Understanding the differences can help you decide which option works best for your circumstances.

1. The Statutory Route (Section 42 Notice)

Most leaseholders qualify for the statutory right to extend their lease under the Leasehold Reform, Housing and Urban Development Act 1993.

What you receive under the statutory process:

• An additional 90 years added to your lease
• Ground rent reduced to a peppercorn (effectively zero)
• A structured, legal process with clear timeframes
• Protection if negotiations break down

How the statutory process works:

Step 1: Valuation
A specialist lease extension valuer assesses the premium you should offer

Step 2: Section 42 notice
Your solicitor serves a formal notice on the freeholder, setting out your proposed terms and premium

Step 3: Freeholder’s counter‑notice
The freeholder must respond within a set period (usually two months)

Step 4: Negotiation
Both sides’ valuers negotiate to agree the final premium

Step 5: Completion
The new lease is granted with the statutory 90‑year extension and peppercorn rent.

This route is often recommended because it provides certainty, a clear legal framework, and protection against unfavourable terms.

2. The non-statutory/informal route (negotiating directly with the freeholder)

Some leaseholders choose to approach their freeholder directly to negotiate an extension without using the statutory process.

Potential advantages:

• Can be quicker
• Sometimes cheaper
• More flexible terms in certain cases

Potential risks:

• The freeholder may offer shorter extensions, such as 20–30 years
• Ground rent may increase or include onerous clauses
• No set timeline, meaning delays are common
• No legal protections like those built into the statutory route

While informal extensions can work well in the right circumstances, leaseholders should approach them cautiously and always compare the offer to what the statutory route would guarantee.

I often speak with clients about both options so they can decide which route works best for their circumstances.

Costs and fees you should expect

The total cost of extending a lease varies depending on the property, the length of the remaining lease and market conditions. Typical costs include:

For the leaseholder:

• Premium payable to the freeholder
• Valuer’s fees
• Your solicitor’s fees

Under the statutory route, you must also pay the freeholder’s:

• Legal costs for reviewing the notice
• Valuation costs relating to the lease extension

You do not pay the freeholder’s negotiation costs.

Because each lease is unique, it’s advisable to obtain professional advice early so you understand the likely costs and can plan accordingly.

My experience supporting leaseholders

Over the years I’ve helped a number of leaseholders extend their leases, and one thing I’ve found is that many people only start looking into it once they realise their lease is getting shorter or they are thinking about selling or remortgaging. By that point the process can feel quite daunting because of the terminology and the steps involved.

I aim to make the process as straightforward as possible by:

• Explaining the Section 42 process clearly
• Setting out realistic costs and timelines
• Reviewing any informal offers from freeholders
• Helping clients decide which route suits their situation best

Every lease, property and freeholder is different, so tailored advice is essential.

Leasehold reform – what’s changing?

There’s been increasing focus on leasehold reform in recent years, with the government proposing changes designed to make lease extensions simpler and more affordable. While the final details are still evolving, it’s clear that leasehold issues are a significant concern for many homeowners across England and Wales.

Staying informed and acting early can help you avoid unnecessary costs, particularly where marriage value may soon become an issue.

If your lease is beginning to shorten, now is an ideal time to explore your options. Whether you choose the statutory route or are considering an informal agreement with your freeholder, understanding the implications is key.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.