Top 10 Leasehold Enfranchisement FAQ’s

What is a lease extension, and when should a leaseholder consider one?
A lease extension is a legal process that increases the length of the term of a lease. Leaseholders have a legal right to increase their lease term but can also approach their landlord to do this voluntarily. If tenants use the legal right, the landlord must extend the lease term by 90 years and remove the ground rent. The landlord will require payment in return for the extended lease (and removal of ground rent). This is called a premium.

Leaseholders commonly consider extending when their lease term falls below 90 years, as shorter leases can affect how much the flat can be sold for, the number of buyers that might want to buy the flat and the ability of the leaseholder to mortgage the property. Once a lease falls below 80 years, the amount of the premium can increase significantly.

A leasehold can compel their landlord to grant them a longer lease in return for a payment. This is the statutory route. A tenant must meet certain qualifying criteria to be able to go down the statutory route. A statutory lease extension requires the landlord to extend the lease term by adding 90 years to the end of the current lease term and removing the ground rent. There is also access to the Tribunal, if terms or the premium cannot be agreed, and the Court, if the landlord does not progress through the process and grant the extended lease.

A voluntary or informal extension is negotiated directly with the landlord outside the statutory framework. This can sometimes be quicker and more flexible, but the landlord may refuse to remove the ground rent, suggest a shorter term to the extension or seek other terms that would not apply under the statutory regime. Leaseholders should compare the proposed terms carefully before proceeding.

The premium is the compensation paid to the landlord for extending the term of the lease. Valuation is a specialist exercise that traditionally takes account of factors including:
• The landlord’s loss of future ground rent.
• The fact that the landlord will not regain possession of the flat for a longer period of time (ie until the extended term has expires).
• The value of the flat and lease.
• The length of the existing lease term.
• Compensation for any other losses prescribed by statute.
Valuation methodology is governed by legislation and Tribunal decisions. Specialist valuation advice from a surveyor experienced in enfranchisement work is usually essential.

The value of a lease goes down as the term goes down. The value to the landlord of possessing that lease goes up as the lease term goes down. Marriage value is the term used to describe the extra value that is being lost to the landlord by extending the lease and pushing further into the future the point at which the landlord will be able to take the flat back. The lease becomes more valuable to the leaseholder when the term is extended and the leaseholder is required to share some of that value with the landlord.

Historically, marriage value has formed part of the premium calculation where a lease has less than 80 years unexpired. The Leasehold and Freehold Reform Act 2024 introduces significant reforms to how the premium of a lease extension is valued but the commencement provisions of that Act are being implemented in stages. Not all reforms took effect immediately when the Act came into force. The Act removes marriage value but that part of the Act is one that is not current in force. This means that marriage value still applies.

Yes. Qualifying leaseholders have a right, subject to qualifying, to buy the freehold of their block through a process called “collective enfranchisement” under the Leasehold Reform, Housing and Urban Development Act 1993.
Whether or not leaseholders can exercise this right depends on various criteria relating to the building, the leases and the participating leaseholders themselves. At least 50% of qualifying tenants in the block must participate to claim the freehold.

For example:
Number of qualifying flats and minimum participants required:
4 flats – 2 leaseholders
10 flats – 5 leaseholders
20 flats – 10 leaseholders
50 flats – 25 leaseholders

The Right to Manage (RTM) allows qualifying leaseholders to take over management functions from the landlord through a Right to Manage company without purchasing the freehold.

The key distinction is ownership. Under the RTM, the landlord retains the freehold ownership, whereas collective enfranchisement enables leaseholders to purchase the freehold itself. RTM can therefore offer control over services, maintenance and management decisions without the cost of acquiring the reversionary interest.

A missing freeholder does not necessarily prevent a lease extension or freehold purchase. If reasonable efforts have been made to locate the freeholder without success, the leaseholder(s) can apply to the Court for a vesting order. This allows the Court to authorise the claim to proceed without the freeholder’s involvement. The premium can be determined by the Tribunal and paid into Court, enabling the lease extension or freehold acquisition to complete even though the freeholder remains untraceable.

The reasonable steps that the leaseholder(s) must take to trace their landlord included carrying out investigations at HM Land Registry, engaging tracing agents, advertising and conducting enquiries.

When a valid statutory notice is served, a landlord is not obliged to accept the leaseholder’s proposal without question. Depending on the circumstances, a landlord may:
• Admit that the leaseholder is entitled to proceed with the claim.
• Challenge whether the leaseholder, participating tenants or building satisfy the statutory qualification requirements.
• Dispute the premium proposed and seek a higher valuation.
• Negotiate the price and the terms of the new lease or transfer.
• Raise issues regarding the validity of the notice or procedural compliance.
• Refer any disputed issues, including qualification, valuation or terms, to the First-tier Tribunal (Property Chamber) for determination if agreement cannot be reached.

Landlords should obtain legal and valuation advice promptly because statutory time limits are strict and failure to respond appropriately within those time limits can have significant consequences. In some circumstances, a landlord who fails to serve a counter notice (or fails to serve a valid counter notice ) may lose the opportunity to dispute the claim and the leaseholder may apply to the Court for the lease to be extended or freehold transferred.

Potentially. The position for shared ownership leaseholders has historically been more complex than for other leaseholders. Whilst it was traditionally thought that a leaseholder needed to staircase to 100% ownership before qualifying for a statutory lease extension, recent case law in related leasehold legislation has led to debate about the scope of statutory rights for shared ownership leaseholders. The generally accepted position is that if the landlord, lease, flat and building qualify, the fact that the lease has not been staircased should not bar a leasehold from extending their lease under statute.

Given the complexity of this area, specialist legal advice should be obtained by shared ownership leaseholders wishing to extend their lease and landlords of such leases when/if they receive a claim for an extended lease.

There is no universal answer. The appropriate course depends on:
• Current lease length.
• Estimated premium.
• Whether the lease is approaching 80 years.
• Mortgage requirements.
• Property sale plans.
• Which provisions of the Leasehold and Freehold Reform Act 2024 are currently in force.

For some leaseholders, delaying could potentially provide advantages under future reforms. For others, particularly those approaching 80 years left on their term, waiting could increase cost or create transactional difficulties. A tailored valuation and legal assessment is therefore essential before deciding whether to proceed immediately or defer a claim.