Extend lease informally
Extending a lease informally requires a willing freeholder and leaseholder, seeking to transact fairly. There are risks for both parties in not serving a formal Section 42 notice.
A freeholder is not responsible for the fair and reasonable valuation and legal fees. Please contact us to find out more.
My leaseholder has approached me
As a freeholder, your leaseholder may approach you to say they are interested in extending their lease. If you have received a section 42 notice, you should pass this to your solicitors immediately and instruct a valuer to provide a valuation. Please see: “I have been served a section 42 notice”.
If notice has not been served, we recommend you contact us. We will write to the leaseholder, requesting payment and provide you a valuation report and advise on an offer to be put forward.
Informal lease extensions: good or bad?
On an informal basis, the lease terms can vary and include a ground rent. What is offered will depend on whether you require an income stream from the freehold or wish to extract more value now.
Once terms are agreed, you will need to instruct a solicitor to draw up the new lease and completed the extension.
There may be tax savings that can be made if a formal notice is served. You should consult your financial advisor before making any decision.
What is a freehold?
A freehold is the complete ownership of a piece of land and all immovable structures built on it. If you buy a freehold, you’re responsible for maintaining your property and land, so you’ll need to budget for both these costs. Most houses are freehold but some might be leasehold, usually through share-ownership schemes.
What is a section 42 notice?
A section 42 notice (also known as a tenant’s notice) is served on the landlord/freeholder of a property and starts the purchase of the freehold or lease extension process.
Once a valuation of the property has been carried out by your surveyor they will send the valuation on to your solicitor. Next, your solicitor will serve a section 42 notice on your landlord/freeholder advising the amount you are willing to pay for the freehold.