Lease extensions simplified
Shared Ownership leases and social housing leases come in a variety of shapes and sizes, and as a result, knowing what to do when you are considering selling or staircasing can make all the difference.
Step one – What is your provider’s policy on lease extensions?
Ask your provider for their lease extension policy; these vary amongst providers, and houses and flats are often treated differently, as the relevant law differs between these two types of property.
Providers often have policies in place to assist you when extending your lease. These can vary from what the typical statutory lease extension process looks like, but often the variations are good and can benefit you.
Step two – What are your lease terms?
Get hold of a copy of your lease and review it for the following information:
- The term of the lease – this outlines the length of the lease you have; the most common terms are for 99 years or 125 years, but typically the more modern your lease, the longer the term is.
- Check your commencement date – this isn’t always as easy as it sounds, and it’s not generally the date written on the front cover; you may need to read through your lease carefully to find this.
- Calculate the term remaining – for example, if your lease started on December 25th 2000 and was for 99 years, then by February 1st, 2026, your remaining lease term would be 73.89 years.
Here’s a useful tool to help you check your lease length: Lease search tool.
Key factor
Don’t let your lease term drop below 80 years; if it does, the cost of your lease extension will increase overnight as ‘marriage value’ will have become payable. If close to this 80-year mark, it’s worth considering doing your lease extension now.
Step three
Back to your lease, do you pay a ground rent?
Shared owners who own an equity share of less than 100% typically don’t pay a ground rent, but it’s worth checking your lease to be sure.
Don’t confuse this with the rent you pay on the unowned part of your home – that’s a different type of rent.
Ground rents typically start once you own 100% equity in your home.
Key factor
If you do pay ground rent and it rises throughout the term of the lease, look carefully at the level of ground rent and how often it may increase. Sometimes ground rent rises very quickly, and it can be expensive to deal with, adding to the cost of your lease extension premium.
Step four
- Once you understand your lease and equity, the next step is finding out the value of your home.
- Your provider will insist on a valuation undertaken by a RICS qualified valuer; your provider may have a panel of valuers that it has used previously. Don’t be suspicious of this; not all RICS firms provide this type of valuation as it is a specialist type of service.
2. The cost of the valuation will vary, and it can often be cheaper to use a firm recommended by your housing provider or they may be able to recommend a firm that can help you. These firms will be familiar with the process and impartial in their approach.
Key factor: Future reform
Leasehold is in the process of changing, but it has proved to be a long and slow process, so be mindful that whilst there are proposed changes that aim to make it easier, faster and cheaper for lessees to deal with their lease extension, these changes may not come into use before your lease drops below 80 years, or your ground rent becomes capped at £250 per annum.
Be mindful that reforms take time, so it’s best to seek advice early and, if in doubt, speak to either your housing provider or a suitable RICS valuer.
Additional advice can be found via the government’s resource for leases: The Lease Advisory Service.
To discuss further, you can also contact me, Chris Baker, Owner of McDowalls Surveyors.
