Extending a lease is essential for protecting your property’s value, but not all extensions follow the same path. Many leaseholders choose an informal lease extension because of its speed and flexibility. But this route comes with potential risks to be aware of. In this guide, we’ll explore informal lease extensions, how they compare to formal (statutory) extensions, and what to consider before deciding.
What is an informal lease extension?
An informal lease extension is a private negotiation between the leaseholder and the freeholder (landlord). They are often quicker and allow for tailored terms, but they lack the protections of statutory extensions. Unlike a statutory lease extension, which follows strict legal rules under the Leasehold Reform, Housing and Urban Development Act 1993, the informal route offers more flexibility.
Key features of informal lease extensions:
The leaseholder and freeholder agree on the terms without following a standard legal framework
The extension term can vary, often shorter than the 90 years guaranteed by a formal extension
The freeholder may introduce different ground rent terms, including escalating charges
Pros and cons of an informal lease extension
Pros ✅ | Cons ❌ |
|---|---|
Informal extensions can be completed in three to six months, whereas statutory extensions may take a year or longer. | Freeholders often include clauses for escalating ground rent, which can significantly increase costs over time. |
The terms can be customised to suit your individual needs. | Unlike the statutory process that guarantees a 90-year extension, informal agreements may offer less. |
Negotiating directly with the freeholder may result in a lower initial premium, especially for longer leases. | Without statutory safeguards, the freeholder has more control over the terms. |
What is a statutory lease extension?
A statutory lease extension follows the formal legal process set out by the Leasehold Reform Act 1993. Leaseholders have the right to extend their lease by 90 years, reducing ground rent to a peppercorn (effectively zero).
Key requirements for a statutory lease extension:
The leaseholder must have owned the property for at least two years.
The original lease must have been for more than 21 years.
Statutory lease extensions provide clear benefits and protections but can be more expensive and time-consuming.
Pros and cons of a statutory lease extension
Pros ✅ | Cons ❌ |
|---|---|
The extension adds 90 years, reducing ground rent to zero, and protecting you from future increases. | The process can take between six and twelve months. |
Leaseholders have clear rights, and disputes can be taken to a tribunal if necessary. | Premiums are often higher due to the guaranteed length and ground rent elimination. |
A statutory extension can be highly attractive to future buyers and mortgage lenders. |
Informal lease extension process: Step-by-step guide
If you decide to pursue an informal lease extension, here’s a guide to help you understand the typical steps. If you're looking to learn more about the formal route, head to our guide on the full leasehold extension process.
1. Contact your freeholder
Start by approaching your freeholder or their managing agent. Express your interest in extending the lease and request an initial offer.
2. Hire a surveyor
Even for an informal extension, it’s wise to get an independent valuation. A chartered surveyor can estimate a fair premium and highlight any risks related to the proposed terms.
3. Review the freeholder’s proposal
Your freeholder will present terms, including the premium and any changes to ground rent. Carefully review these and watch for clauses introducing rising ground rent or other restrictive conditions.
4. Engage a solicitor
A lease extension solicitor can review the terms to ensure your interests are protected. They’ll also handle the legal documentation.
5. Negotiate if necessary
If the initial terms are unfavourable, your solicitor can negotiate with the freeholder to reach a better agreement.
6. Complete the extension
Once terms are agreed upon, your solicitor will draft or review the new lease. The lease must be registered with HM Land Registry to reflect the updated terms.
Should I choose the statutory or informal route?
The choice between a statutory and informal lease extension depends on your circumstances and priorities.
Consider a statutory lease extension if:
You want long-term security with a 90-year extension and no ground rent.
You prefer clear legal protections and recourse if disputes arise.
Your lease is below 80 years, where marriage value significantly impacts the cost.
Consider an informal lease extension if:
You need a quicker process and are confident in negotiating with your freeholder.
The proposed terms are favourable and reviewed by a solicitor.
Your lease still has many years left, and ground rent terms seem manageable.
Do I need a solicitor for an informal lease extension?
Yes, hiring a solicitor is highly recommended, even for informal lease extensions. Without statutory protections, the freeholder may introduce terms that could harm your financial interests. A solicitor ensures:
The proposed ground rent is reasonable and won’t escalate excessively.
You understand all the terms and their long-term implications.
Legal formalities are correctly handled to prevent future disputes.
FAQs
Is an informal lease extension cheaper?
It can be cheaper in the short term, as the freeholder may offer a lower premium. However, this can be offset by ground rent increases and less favourable terms compared to a statutory extension. Always evaluate the full cost with professional advice.
What is the difference between a formal and informal lease extension?
The key difference is that a formal (statutory) lease extension follows strict legal rules and offers greater protection, while an informal extension is a private agreement with more flexibility but higher risks.
Final thoughts
Whether you choose a statutory or informal lease extension, careful planning and expert guidance are essential. The informal route may offer flexibility and speed, but it requires caution to avoid costly pitfalls. Working with a solicitor and surveyor can help you secure terms that protect your investment and provide peace of mind. Whatever your leasehold needs, understanding your options puts you in control.