Informal Lease Extension

What to Look Out for when Considering an Informal Lease Extension

An informal lease extension (sometimes called a voluntary lease extension) can seem like a fantastic way to have your lease extended for a lower cost, and in some cases, it can be a good option. Unlike the statutory route, where the lease is extended by 90 years under the Leasehold Reform, Housing and Urban Development Act 1993, an informal lease extension allows you to negotiate the length of the extension directly with your landlord — often up to 999 years, depending on what both parties agree. However, it’s not something you should rush into, as the terms offered may not always be as favourable in the long run. In this blog, our Lease Extension solicitors explain what you need to be aware of before accepting an informal lease extension.

If you need a quote for a lease extension, try our lease extension calculator.

What is an informal lease extension?

An informal lease extension allows you to extend your lease for a price and on terms you’ve negotiated with your landlord, rather than following the procedure for a statutory lease extension. For a statutory lease extension, you would need to meet the statutory requirements, serve a Section 42 Notice on your landlord and pay a premium to your landlord assessed under the statutory valuation methodology and assumptions in the Leasehold Reform, Housing and Urban Development Act 1993. Extending your lease will usually increase the value of your property and make it more mortgageable (and thus easier to sell when you decide to move on).

You can find out more about the statutory lease extension in our blog on Serving a  Section 42 Notice for a Lease Extension. Alternatively, informal lease extensions do not require you to meet these requirements, plus the premium and terms of the new lease can be negotiated on an informal basis, rather than relying on the statutory valuation used for a statutory lease extension.

How much does a statutory lease extension cost compared to an informal lease extension?

The premium you pay will depend on numerous factors, such as how long is left on the lease and the value of the property. Under the 1993 Act, valuation follows Schedule 13 principles and market evidence and you will usually also need to pay for the surveyor’s valuation and the freeholder’s legal costs. You can receive a rough estimate of your premium using the leasehold advisory service’s online calculator. Under the statutory route, leaseholders typically pay the landlord’s “reasonable” legal and valuation costs relating to the grant of the new lease (not the landlord’s costs of negotiating the price where in dispute). In contrast, you and your landlord can negotiate the price of an  informal lease extension without relying on the statutory valuation for a statutory lease extension, including who will pay for the surveyor’s valuation fee and legal costs. However, despite the fact you are not obligated to pay for the valuation or your freeholder’s legal costs, it is highly unlikely that your landlord will agree to pay for these where they are not required to under statute or the lease.

What term can I extend my lease by with an informal lease extension?

At present, there is no fixed legal limit on how long a lease can be extended by agreement through the informal (voluntary) route. The Leasehold Reform, Housing and Urban Development Act 1993 sets the framework for statutory lease extensions, which currently add 90 years to the remaining term of a qualifying flat’s lease at a peppercorn ground rent. However, this Act does not restrict what can be agreed informally between the leaseholder and the freeholder. As such, the term of an informal lease extension can be negotiated to any length, and it’s common for freeholders to grant extensions of 125, 250, or even 999 years, depending on the arrangement reached.

While informal extensions offer flexibility, they do not provide the same statutory protections as a Section 42 lease extension. Terms such as ground rent, review clauses, and service charge provisions can vary significantly, so leaseholders should always seek advice from a specialist solicitor and enfranchisement valuer before finalising an informal agreement. If the informal deal is structured as a replacement lease (surrender and regrant), the Leasehold Reform (Ground Rent) Act 2022 will generally require a peppercorn ground rent for most new “regulated” long residential leases; a pure variation can leave the old rent in place unless expressly amended.

How long does an informal lease extension take?

Unlike a statutory lease extension which has a fixed deadline, there is no time limit within which an informal lease extension must be completed. Therefore, they can either be much faster or much slower than a statutory lease extension.

However, be wary that if your lease has close to 80 years remaining, your freeholder may intentionally delay the informal lease extension process in order to wait until your lease drops below 80 years. Should your lease fall below 80 years, your freeholder will generally benefit from the ‘marriage value’ incurred – the increase in the lease’s value as a result of the lease extension. For this reason, it may be better to take the statutory route if your lease is short.

How do I start an informal lease extension?

The first thing you would need to do is to approach your landlord (or their managing agent) and ask them to extend the lease. You can make an offer at this stage if you would like to, but this is not necessary. If your landlord agrees to discuss it, you can negotiate the price of the premium and fees with them. It is advised that you instruct a surveyor to value your property and provide an estimate of a fair premium both for a statutory lease extension and on an informal basis. You should also ask your solicitor to confirm the intended legal structure (new lease versus variation), ground‑rent compliance with the 2022 Act (for new “regulated” long leases), and lender acceptability before terms are agreed.

Would I need to pay SDLT on an informal lease extension?

Stamp Duty Land Tax (SDLT) may be payable on a lease extension depending on the chargeable consideration for the transaction. This can include any premium paid for the extension and, where relevant, the net present value (NPV) of any rent reserved by the extended lease (many statutory extensions reserve a peppercorn so there is no rent element). Whether SDLT is payable—and whether an SDLT return is required—depends on the figures and the SDLT rules/rates in force at completion (including higher rates for additional dwellings, which are not a flat 3% and apply by reference to bands). An SDLT return is generally required where consideration is £40,000 or more, even if no SDLT is ultimately due.

If the property is owned by a limited company or Special Purpose Vehicle (SPV), the SDLT liability can be more complex. Even if no premium is paid, SDLT may still apply based on the market value of the lease extension. Connected‑party/company rules and, in higher‑value residential cases, ATED/15% rates or reliefs may also be relevant. Our specialist SPV  conveyancing solicitors can advise you on your SDLT position and manage your lease extension with ease.

Can my landlord refuse an informal lease extension?

Neither the landlord nor the leaseholder is under any obligation to accept a proposed informal lease extension, even if you are eligible for a statutory lease extension. Consequently, if you and your landlord cannot come to an agreement, you may have to seek a statutory lease extension, which your landlord cannot generally refuse if you qualify (for flats), though they may dispute eligibility, valuation or procedure.

What should I look out for in an informal lease extension?

You need to examine any informal lease extension offer you receive carefully. It’s advisable to seek advice from a specialist leasehold extension solicitor and valuer. This does not mean just checking that the premium is reasonable, but that the terms of the lease are also fair.

For example, the lessor may attempt to include onerous terms such as the doubling of ground rent, which may be unacceptable to mortgage lenders and leave you unable to sell or remortgage the property. While ground rent clauses are already banned for new leases under the Ground Rent Act 2022, the 2024 reforms will extend this protection to existing leases, making unfair rent terms unlawful across the board.

In addition, the Government has proposed introducing a £250 per annum cap on ground rent for existing leases. This proposal, which is yet to come into force, aims to protect leaseholders who are still paying historic ground rents that can be excessive or escalating. Once implemented, it will apply only to existing leases that continue to require ground rent payments — not to new or extended leases, which are already limited to a peppercorn (£0) ground rent under the Leasehold Reform (Ground Rent) Act 2022. 

Is an informal lease extension better than a statutory extension?

If you can reach an advantageous agreement with your landlord, an informal lease extension may be better for you. Informal lease extensions are not only usually quicker and cheaper, but may allow you to extend your lease up to 999 years; far more than that which a statutory lease extension currently allows. You also have much more freedom scope to negotiate the premium on an informal lease extension compared to a statutory lease extension. However, it will ultimately depend on whether you can reach an advantageous agreement with your landlord. If you have close to 80 years remaining on your lease, we would advise that you do not request an informal lease extension, and advise you to instead take the statutory route. This is because once your lease has less than 80 years remaining, your freeholder will be entitled to the marriage value when extending your lease – consequently, they may intentionally delay the lease extension process in order to obtain that additional marriage value.

Conveyancing and deed of substituted security

If you have a mortgage, a deed of substituted security is generally not required on a statutory lease extension because the lender’s charge typically attaches to the new lease by statute; however, lenders may still require consent/endorsement and post‑completion formalities. For informal extensions structured as a replacement lease (surrender and regrant), lenders usually require a panel solicitor to obtain a deed of substituted security/new mortgage deed and to serve any required leasehold notices; lender fees may apply. Starck Uberoi Solicitors are on the panel for almost all lenders – please see our list of  lender panels here.

What if I own a share of the freehold of the block?

As someone with a share of the freehold, you have more room to negotiate with your fellow freeholders the terms by which your lease will be extended, as they will also have to negotiate the terms with you when they want to extend their leases. It is common for co‑freeholders not to charge one another a premium when they have an equal share in the freehold title. You will still need proper documentation (commonly a deed of surrender and regrant/replacement lease) and lender consent where the flat is mortgaged. For more information on how owning a share of freehold works, please read our blog post on share of freehold conveyancing.

Do I need a solicitor for an informal lease extension?

Even for an informal lease extension, there are a few things you will almost always need a solicitor for. A solicitor will usually be required to handle the transaction and review the new lease with you in order to ensure everything is correct. They are also responsible for ensuring that your lease adheres to your mortgage lender requirements. You will also need a solicitor who is on the conveyancing panel for your chosen lender, or else they may struggle to register the lease extension at the land registry. Our solicitors are on the conveyancing lender panel for the majority of high-street lenders including Barclays, HSBC, Halifax, Nationwide, NatWest and Santander – see the full list here.

How Starck Uberoi Can Help

Our lease extension solicitors can check the terms of any offers with you and warn you of anything which could pose a problem. We have extensive experience in handling a wide range of leasehold property matters, and can provide pragmatic legal advice to help you make a decision. Once you have decided, you can be confident that your lease extension is in the best hands. For more information, please see the lease extension page on our website. To book an appointment, please call 020 8840 6640 or email solicitor@starckuberoi.co.uk.

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Our partner, Raminder Uberoi, can also provide a Notary Public Service at any of our offices.