What does 'Lease Extension' mean when buying a property?
Find out what Lease Extension means when you are buying a property. 'What does Lease Extension mean?' plus over 150 other property related terms and jargon in plain English
At the end of the lease you must return it to the freeholder who owns the actual bricks and mortar and the land underneath the property.
You can, however, increase the lease length. This is done by agreeing with the freeholder (or via arbitration) how much more the property would be worth with the longer lease. This figure is paid to the freeholder.
As an example lets say I own a leasehold flat with a 70 year lease. Many mortgage lenders would view this as a "short lease" because by the time I pay of my 25 year mortgage there will only be 45 years left on the lease.
Leases of less than 50 years tend to have an effect on the property's value.
So my flat, with the 70 year lease, is worth £90,000. I see other similar leasehold flats in my area with 99 year leases are selling for £100,000 so I offer my freeholder £10,000 to extend my lease to 99 years.
Freeholders cannot refuse to extend leases but they can make a counter offer. Say my freeholder countered with £30,000. I can go to arbitration where a panel will decide what is "reasonable". The freeholder must accept this outcome.
To find out more about the ins and outs of leasehold properties pick up a copy of my ebook How to Really Buy a Property.