Share of Freehold Lease Extension Explained

How to obtain a share of freehold lease extension

Most leases are extended by either serving a section 42 notice on the property’s freeholder or by negotiating an informal lease extension with the freeholder – but what do you do if you own a share of the freehold yourself? Here’s how to obtain a share of freehold lease extension.

What is a share of freehold property?

Instead of the freehold being owned by a landlord, the freehold is owned collectively by several leaseholders who also own leases within the building (or by a limited company which the leaseholders instead own shares in). One of the key benefits of owning a share of the freehold is the opportunity to extend your lease cheaply.

As long as all co-freeholders agree, you could extend your lease up to a maximum of 999 years for zero premium. You also have more control over the building’s maintenance and insurance rather than having to rely on your landlord to arrange maintenance and insurance on your behalf. If enough leaseholders are willing (and eligible), you can force your landlord to sell the freehold to you through a process called Collective Enfranchisement. Alternatively, some flats are sold with a share of the freehold already included. Find out more about share of freehold here.

Why should I obtain a share of freehold lease extension

While connected, your lease and your share of the freehold are separate legal entities. If your lease was to run out, you would still have your share of the freehold but would no longer own the leasehold property, meaning you wouldn’t be able to live there or rent it out.

You would be relying on your co-freeholders (or the limited company that owns your property’s freehold) to grant you a new lease with favourable terms. Even if your co-freeholders would grant you a new extended lease without any trouble, that doesn’t mean you should forget about extending your lease altogether. Even though having a share of the freehold is quite attractive to many prospective buyers, a seller will likely struggle to find a buyer if they have less than 80 years remaining on their property’s lease – indeed even if a buyer is willing to take the risk, most lenders would not. Having a shorter lease also has a detrimental effect on your property’s value.

How many years can I extend my share of freehold property lease by?

Another benefit of a share of freehold property is the option to extend your lease up to the maximum 999 years, compared to typical leaseholders who can only extend their lease by 90 years under the current law, soon to increase to 990 years under the Leasehold and Freehold Reform Act 2024. You will need your fellow co-freeholders to agree on the number of years you can extend your lease by. Fortunately, due to the fact that your fellow leaseholders with share in the freehold will likely want to agree on the terms for their own lease extensions, it is in everyone’s best interests to be open to negotiation.

How do I extend my share of freehold lease?

Most share of freehold property owners will extend their lease by way of an informal lease extension, which means they will agree on the length, premium and terms of their lease extension with the other freeholders. You do not need to meet any statutory requirements to extend your lease informally and can extend your lease by up to 999 years for no premium (assuming your fellow co-freeholders agree to let you do this), unlike leaseholders taking the statutory lease extension route, who will need to offer a ‘fair premium payable’ (as determined by a RICS chartered surveyor). In most cases, your lease will be extended by way of a surrender and regrant: as the name implies, you simply surrender your current lease and are granted a new lease on the same terms as the previous lease except for the lease’s length, which is extended. You can use this opportunity to make some other changes to your lease’s terms at the same time, such as to alter your demise, correct any clerical errors or give yourself more rights to make alterations; although you will still need consent from the other freeholders before you can change your lease significantly. The necessary surrender and regrant will require the consent and cooperation of any existing lender (see paragraph headed: “Do I need my lender’s consent for a share of freehold lease extension?” )

Since 30 June 2022, any newly granted or extended lease must have a peppercorn (zero) ground rent under the Leasehold Reform (Ground Rent) Act 2022. The Government has also proposed introducing a £250 per annum cap on ground rent for existing leases. This proposed change, which is not yet in force, would limit the ground rent payable on leases granted before the 2022 Act took effect. Once implemented, it will apply only to existing leases that still attract ground rent, ensuring leaseholders are not charged more than £250 annually. Leases extended or newly granted after June 2022 will continue to carry only a peppercorn (£0) ground rent.

Informal Lease Extension for Share of Freehold

Most share of freehold property owners extend their lease informally, negotiating directly with their fellow co-freeholders. In an informal extension, you agree on the lease length, premium (if any), and terms with the other freeholders without having to comply with statutory requirements. This route allows you to extend your lease up to 999 years for zero premium if all co-freeholders agree. Extensions are usually completed via a surrender and regrant, meaning your current lease is surrendered and a new lease is granted with the agreed terms. This is also an opportunity to make other amendments to your lease, such as altering your demise, correcting clerical errors, or securing additional rights, subject to co-freeholders’ consent. Informal extensions are typically quicker and simpler than the formal route, and legal costs are often lower, especially when multiple leaseholders coordinate to extend leases simultaneously.

Formal Lease Extension via Section 42 Notice

If agreement cannot be reached with your co-freeholders, the formal route under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993 remains available. This allows you to extend your lease even if your co-freeholders are uncooperative. It also requires you to pay a premium determined by a statutory formula, calculated based on the property’s value and remaining lease term. You may need to instruct a RICS chartered surveyor to determine a fair premium, and if the parties cannot agree, the matter may be referred to the First-Tier Property Tribunal. The formal route ensures your lease extension can proceed regardless of disputes, though it is generally more time-consuming and costly than the informal approach.

Can a solicitor act for both freeholders and leaseholders at the same time?

It’s important to remember that each co-freeholder represents two separate legal entities: themselves as a leaseholder, and themselves plus their fellow co-freeholders as the property’s freeholders. You’ll probably be glad to know that as long as there is no conflict of interest between the leaseholder and co-freeholders, leasehold solicitors can usually act on behalf of both the leaseholder wanting to extend their lease and the co-freeholder. For there to be no conflict of interest, all parties (the leaseholder and the freeholders, that is) need to consent to the lease extension and agree on the terms of the lease extension. If there are any disputes between the parties, the leaseholder and the co-freeholders will need to instruct different solicitors.

Do I need my lender’s consent for a share of freehold lease extension?

While you have a mortgage secured on your property, you will need consent from your lender before you can extend your lease.  To complete the registration of the new lease, you will also usually need a deed of substituted security from your lender, which moves your mortgage from your old lease to the new, extended lease. You’ll also need consent from your lender if you’re altering the demise of your property (the property that’s included in your lease), for example if you want to purchase the loft space or a parking space. To save time and money on obtaining the deed of substituted security, you should instruct a solicitor on the lender panel of your chosen lender. Because lender panel solicitors are able to act for both the lender and borrower, instructing them means you spend less time waiting for a response and negates the need to pay for both the solicitor acting for you and for your lender’s solicitor. We are on the lender panel for all major high street lenders including Barclays, Halifax, HSBC, Nationwide, NatWest and Santander – see the full list of our lender panels here.

Do I need to get a property valuation for a share of freehold lease extension?

Not if you and the other co-freeholders have already agreed that you’re not going to pay a premium for your lease extension. If you are going to pay a premium however, it is recommended that you get a valuation from a RICS chartered surveyor to ensure that you’re paying a fair price. A formal valuation is also advisable if you plan to rely on statutory rights under Section 42, or if disagreements arise between co-freeholders.

How long does a share of freehold lease extension take?

Assuming you and your fellow freeholders can agree on a term and premium quickly, arranging the lease extension itself is generally quite straightforward and will generally take no more than 4 weeks where we can act for both parties, and roughly 8 weeks where we are only able to act for one party to a lease extension. It may take longer if you have a mortgage on your property or if one of the freeholders takes longer to give their consent.

Do I have to pay stamp duty on my lease extension?

It is highly unlikely that you’d need to pay stamp duty on a lease extension, especially if you’re not paying a premium for your share of freehold lease extension (although). At the time of writing, you will usually only pay stamp duty if the lease extension premium is £40,000 or over and if the leasehold property is not your sole residence. Where the leasehold property is not your sole residence (or is a buy to let), you will usually need to pay stamp duty at 3% of the premium. However, you should not need to pay SDLT if the lease premium (or market value of the extension) is under £40,000.00. Where the amount is over £40,000.00 you will need to fill out an SDLT return even if you won’t need to pay any stamp duty. You should always confirm your SDLT position with your conveyancer, as rules can change and may differ for company-owned or investment properties.

Do limited companies and SPVs pay stamp duty on a share of freehold lease extension?

If you own your leasehold property in a limited company name, you’re more likely to pay stamp duty. Even if you won’t be paying a premium for your lease extension, you may have to pay Stamp Duty based on the market value of the lease extension. If your property is owned via a Special Purpose Vehicle (SPV), this can make understanding your stamp duty liability more complicated. Our specialist SPV conveyancing solicitors can help you understand your situation and complete your lease extension with ease. Find out more about our SPV conveyancing services here.

Can all leaseholders extend their leases simultaneously?

Yes, they can, and it can be a very good idea to do so. Extending your leases simultaneously reduces the chance of a dispute and provides a good opportunity to make sure all leases are in the same format, which is important for the sake of clarity and to again reduce the chance of a dispute. Our lease extension solicitors can help you keep the legal fees down, with our discount for co-freeholders extending their lease extension at the same time. Get in touch with our team today for a quote. Simultaneous lease extensions also ensure consistency in lease wording, which helps avoid lender issues and title discrepancies.

How much does it cost to extend my lease if I own a share of the freehold?

Compared to most other lease extensions where the leaseholder does not own a share of the freehold, extending the lease on your share of freehold property is likely to be significantly cheaper due to the fact that your co-freeholders may agree to charging you no premium. Should this be the case, the most significant cost when it comes to extending your lease when you own the freehold will be the legal fees. Our solicitors can help you save costs on your legal fees; our fees start at £1,900.00 plus VAT and disbursements for a single lease extension, whereas we can offer significant discounts when acting for multiple co-freeholders who are extending their leases at the same time.

What if the freeholders cannot agree on the premium or lease terms?

Even where you have a share in the freehold, if communications breakdown you can still obtain a lease extension via the formal route under Section 42 of the Leasehold Reform, Housing and Urban Development Act 1993. Depending on whether the freehold is owned in your individual names or as a company, you will either need to serve a section 42 notice onto the company or onto all freeholders (yes, including yourself). The downside of the formal route is that you will only be able to extend your lease by a maximum of 90 years (to become 990 years once the Leasehold and Freehold Reform Act 2024 comes into force) and that you will need to pay a premium. The premium will be determined by a formula set out in the Leasehold Reform Act 1993 which calculates a sum based on the value of your lease and the number of years remaining. Even determining the value of the property may not be so straightforward, however. The most surefire way to get a fair, unbiased valuation of the property is by instructing a RICS chartered surveyor to carry out a survey on the property. As long as all freeholders can agree that the figure offered by the surveyor is fair, the premium itself is worked out by a formula set out under the Leasehold Reform Act. If the freeholders cannot agree on a figure for the lease extension, you may have no choice but to make a claim to the first-tier property tribunal. The 2024 reforms aim to simplify valuation methods and reduce the likelihood of disputes reaching the tribunal.

I want to sell my flat and share of the freehold – should I extend the lease first?

If your lease has less than 80 years remaining on it, it will be hard-pressed to find a mortgage lender willing to lend on the property. Find out more about selling your short lease flat in our dedicated blog post. Alternatively, you, can ask your co-freeholder to agree to grant the extended lease directly to the buyer. Bear in mind that you will also need your co-freeholder’s co-operation for this as well as to sell your share of the freehold. All freeholders will have to give their consent to the sale, which can be a problem if one of the freeholders is difficult to get in contact with or unwilling to co-operate with you. As the two-year ownership rule is abolished under the 2024 Act, buyers are able to serve a Section 42 Notice immediately after completion, further easing sales of short leases.

Can I change my share of freehold lease terms while extending the lease’s length?

You can, as long as the other freeholders agree to the changes. You can surrender your current lease and have the lease re-granted with additional changes as well as the change to the lease’s length, which could save you time and money on legal fees. For more information, please see our blog post on changing the terms of your lease.

Can I remortgage and extend my lease at the same time?

If your lease term is too short to meet your new lender’s eligibility criteria, you can arrange for your remortgage to complete at the same time as your lease extension. That way, you can prepare your remortgage without having to wait up to a year for your lease extension to be registered, so that your remortgage completes at the same time as your lease extension does. Completing your remortgage and lease extension at the same time does require you and your conveyancer to work efficiently and avoid mistakes in order to ensure completion takes place on the same day. Read our blog post on remortgaging and lease extensions to make sure you understand the process before you begin.

How Starck Uberoi Solicitors can help

Our knowledgeable leasehold solicitors are committed to providing an efficient and effective service in all matters and can help you with your share of freehold lease extension with ease.  We go above and beyond to provide a comprehensive service to all clients, with jargon-free advice and an individualised approach to each matter. To book an appointment, please call 020 8840 6640 or email solicitor@starckuberoi.co.uk.

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You may also want to visit our calculator for lease extensions.