Flat Extend Lease

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Ashley Connell

Edited by Ashley Connell

Leasehold Enfranchisement Solicitor at Hetts

Informal Route Lease Extensions

A small minority of completed lease extensions were originally agreed via the informal route method. Generally, infomal extensins should be avoided although they may be suitable in some circumstances.

What is an informal lease extension?

Informal route lease extensions are a direct agreement between the freeholder and leaseholder without officially commencing any statutory route. Section 42 notices are not required, although sometimes a landlord will request one to initiate the agreement.

Informal Lease Extensions

Advantages of informal lease extensions

  • More certainty at the outset on the outcome of costs.
  • You don't have to own the property for 2 years or more to qualify.
  • Depending on the freeholder, the process can be quicker.
  • Legal fees are more likely to be cheaper, although it's likely that a higher premium would counteract this.

Disadvantages of informal lease extensions

  • You may even end up paying a higher premium to the landlord, as they usually will not negotiate.
  • Any existing ground rent may continue, or increase with rent reviews, in contrast with the statutory route which gives the leaseholder the right to cancel ground rent entirely, although remember that the landlord is compensated for this loss through the premium. The more future ground rent payable, the higher the premium will be if it is cancelled.
  • The landlord may try to introduce more terms to the lease, putting more obligations on the leaseholder
  • You will be expected to pay the freeholder's valuation fee upfront, which could be a waste of finances if the offer they provide you with is unreasonably high.

General opinion is that the informal method lease extension is only preferred if you feel that the agreed premium offered is good value for money, or you have not owned the lease for at least two years. It is worth paying a higher premium to the landlord provided that the increase is not significantly more than what you would pay in increased legal costs - this is usually an unlikely scenario.

The informal lease extension process

1. Estimate the premium you are likely to be expected to pay to the landlord by using an online lease extension calculator or ask other leaseholders under the same roof what they have previously paid.

2. Contact the freeholder to request a lease extension

3. If the freeholder is willing to grant an informal offer, they will likely request a large fee upfront to pay for their valuer

The freeholder will provide you with a 'take it or leave it' offer.

4. If an agreement is reached then instruct a solicitor to deal with the paperwork.

5. Get a desktop lease extension valuation to compare the freeholder's offer to what it should be.

Although informal lease extensions may suit the circumstances of some leaseholder, for most it is not the best route to take. Statutory extensions are far more common and usually recommended.