Dependants who have not been adequately provided for in a deceased person's will may be able to make a claim for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 . Recently, the High Court considered such a claim by...
Extending a lease can feel like a complex and uncertain process, whether you're a leasehold homeowner trying to protect your property's value or a business owner negotiating a new term for commercial premises.
It’s important that you approach this process as informed as possible, secure in your knowledge of the costs of extending a lease, your rights, and whether stamp duty applies.
At T G Baynes Solicitors, we understand that clarity and cost-efficiency are essential when dealing with property matters. When extending your lease to enhance the value of your home or renewing a commercial lease to secure your business premises, our experts proudly offer straightforward advice and dependable legal support.
In this blog, our expert conveyancing team dive into the most frequently asked questions about lease extensions, covering both residential and commercial situations. We’ll explain everything you need to know so you’re empowered to approach your lease extension with confidence and security.
What is a lease extension?
A lease extension legally increases the length of your leasehold agreement. Leasehold properties are owned for a fixed term, meaning the lease will eventually run out unless extended.
When the lease term becomes short, especially below 90 years, it can reduce the property's market value and make it harder to sell or remortgage. Lease extensions are handled in two ways:
- Statutory lease extension: Under the Leasehold Reform, Housing and Urban Development Act 1993, qualifying leaseholders can apply for an additional 90 years on top of the existing lease at a peppercorn rent.
- Informal (voluntary) lease extension: This involves negotiating directly with the freeholder outside the statutory process. It may offer more flexibility on terms and timelines, but could also result in higher ongoing ground rent or less favourable conditions.
Extending your lease early often results in a lower lease extension cost. The longer you wait, the more expensive it is likely to become.
Can a commercial lease be extended?
Yes, a commercial lease extension is possible and often essential for business continuity. Commercial leases are very different from residential leases, as they are contractual arrangements negotiated between a landlord and a tenant and don’t follow the same statutory rules.
There are two main ways to renew or extend a commercial lease:
- Negotiated renewal: The Landlord and Tenant negotiate directly to agree on terms, including rent, length, and repair obligations. .
- Statutory renewal under the Landlord and Tenant Act 1954: If the tenant has ‘security of tenure’, they can remain in the property and request a renewal. However, this right can be excluded from the original lease, so reviewing your contract carefully is important.
The process often involves detailed negotiations. One of our expert conveyancing solicitors can help assess your rights, draft renewal terms, and ensure your lease supports your long-term business goals. Understanding your commercial lease extension rights also helps avoid unexpected costs or unfavourable terms.
How much does it cost to extend a lease?
Unfortunately, there isn’t a single fixed price, but understanding what factors into the cost of extending lease agreements can help you budget more effectively.
The lease extension cost for residential Lease Extensions generally includes:
- The premium payable to the freeholder: This is based on a formula that considers the property’s market value, the length of the lease, the annual ground rent, and whether the lease has dropped below 80 years (at which point ‘marriage value’ applies).
- Professional fees: You will need to pay for a specialist surveyor (to calculate the premium), a solicitor to handle the legal process, Land Registry fees, and possibly tribunal costs if the leaseholder and freeholder disagree.
- Freeholder’s reasonable legal and valuation costs: Leaseholders are also required to cover these costs under the statutory process.
Typical costs vary significantly depending on the property's value and the lease's length. For example, extending a lease with 85 years remaining might cost a few thousand pounds, whereas extending a lease with fewer than 70 years could cost tens of thousands.
If you're wondering how much to extend a lease in your specific case, we recommend obtaining a formal valuation and speaking to a lease extension solicitor for personalised guidance.
Do you pay Stamp Duty on a commercial lease extension?
Yes, Stamp Duty Land Tax (SDLT) can apply when extending or renewing a commercial lease, depending on the financial terms of the extension. The tax is calculated based on the lease premium paid to the landlord, the annual rent payable over the new lease and the net present value of the lease.
If the Net Present Value (NPV) exceeds the current SDLT threshold set by HMRC, the tenant must submit an SDLT return and pay the appropriate amount.
Because calculating SDLT for lease extensions can be complex, we recommend working with both your solicitor and accountant to determine your liability. Failing to comply with SDLT obligations could result in penalties, so seeking early advice from experts such as the conveyancing team at T G Baynes is essential.
Contact our commercial lease solicitors today
For expert, bespoke advice on extending your lease, please contact our solicitors in Orpington, Dartford or Bexleyheath. Please complete our simple enquiry form or give us a call on 020 8301 7777, and one of our team will soon be in touch.