Q&A - Lease Extension Agreements


I've got a flat that hit 80 years left on lease in July. I’d been in talks with leaseholders prior and struck a deal. Only now my solicitor had put the fear of God in me that's it's not great because it's not peppercorn.

I'm fully aware it's not the best deal, but if I used an agency to do the work it would cost thousands. Anyway, my deal is, 4k to renew lease, £300 a year with an increase on RPI every 10 years. To take lease to 125 years. Is this a fair deal? Should I be worried? Currently it's £75 a year ground rent but I have to pay £150 sub let fee as I rent it out. The new lease will have sublet incorporated so I no longer pay that fee. What's your thoughts / advice please?



We’re seeing more and more lease extension agreements directly between leaseholder and landlord. It is great to see landlords and leaseholders communicating directly and the advantage is of course that a lower premium is accepted in return for a continuing ground rent. This is often deemed to be beneficial to both parties (and it can be), especially where the leaseholder does not have immediate access to funds to meet a high premium. It is also essential to come to an agreement as soon as possible bearing in mind the amount of years left on your lease as the premium payable will only increase and your lease is right on the edge of an extra premium being payable called marriage value (this can increase the costs of the premium substantially) and so this agreement with your Landlord may actually be a great deal.

Unfortunately, I can’t advise directly on whether this is a good deal for you without a bit more information such as location of property, value of property etc. However, if you use one of the online calculators as a guide you should be able to ascertain a rough approximation about how much you will be saving on the premium by pursuing this agreement. Of course, I have to say that a valuation from an expert surveyor would be more accurate and reliable.

My main advice would just be to be aware that what may seem like a good deal in relation to your current financial circumstances and a lower premium may actually work out to be quite expensive over the term of your lease. However, the inclusion of a new subletting clause seems to be advantageous. Finally, unless you intend to keep your property forever then it is important to keep one eye on what would be attractive to any future buyer.  

Your solicitor is right in that you are entitled to follow the statutory route to extend your lease and have the ground rent reduced to a peppercorn.

It should be noted in all circumstances that there may still be the costs of the Landlords solicitors to pay in addition to any agreement.

Laura Severn, Director at LMP Law


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