Lease extensions

Whether you own your lease outright, or through shared ownership or fixed equity, your lease term decreases each year. As your lease term gets shorter it can make your property harder to sell, you may find it more difficult to remortgage and it can decrease the resale value of your property. Once a lease has 80 years or less, some mortgage companies will not lend against them, and we have noticed an increase in lenders requiring a minimum unexpired term of 85 years or more. Shared owners do not currently have a statutory right to a lease extension (whereas outright leaseholders do). 

However, LiveWest offer lease extensions on a voluntary basis to both shared owners and leaseholders. The voluntary lease extension process mirrors the statutory one but is usually less expensive. 

Lease extensions are legal processes, so you should always get specialist legal advice.

There is a premium payable for extending your lease based on a valuation. The premium goes up significantly for leases with a term of 80 years or less (due to ‘marriage value’) so it is worth considering whether you can extend your lease before this. 

If LiveWest are not the freeholder of your home or the development it is situated in, you can still extend your lease, but the extended term cannot exceed the term of the relevant headlease. 

What is Marriage Value? 

Marriage value is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the property. The value that is foregone by LiveWest on a lease extension is linked to the ability to sell a new lease (or for a house to sell the freehold) at the end of the lease term. 

Are diminishing lease terms a concern?

A diminishing lease term can:

• Make your property harder to sell.
• You may find it more difficult to remortgage.
• Decrease the resale value of your property.

However, most shared owners can staircase to 100% and purchase the freehold (if they own a house) and the lease term is not an issue unless you want to sell or remortgage. We want shared owners and leaseholders to be aware that currently, leases do cost more to extend if the remaining term is 80 years or less. 

Relevant Legislation 

The current legislation governing statutory lease extensions is the Leasehold Reform, Housing and Urban Development Act 1993. This allows leaseholders to extend the term of their lease by 90 years for flats (50 years for houses) after 2 years of ownership. 

In May 2024, the Leasehold and Freehold Reform Act 2024 (LFRA) received Royal Assent and aims to improve the rights of residential leaseholders. Such amendments include increasing the standard lease extension term to 990 years for houses and flat removing the requirement for a leaseholder to have owned their home for two years before they can extend their lease or buy their freehold.

It is important to note that although the Act has received Royal Assent, these provisions are not yet in force. Until secondary legislation makes it clearer, it is not yet known how lease extensions will be valued or whether it will be cheaper for all leaseholders to extend their lease in every circumstance or just those with terms under the existing marriage value threshold (80 years).

We recommend that if you are considering extending your lease, that you seek independent legal advice. LiveWest cannot give legal or financial advice. 

Changes to our Voluntary process

LiveWest wants to be an early adopter of changes the government will bring about in the future. As a result, we have amended the voluntary lease extension route. A summary of the key changes is below:

• LiveWest will give the option to extend the lease up to a maximum term of 990 years using the voluntary extension route (or the maximum allowed under any superior lease). External surveyors will be able to offer a 2-option approach i.e. a premium based on a 90-year extension (mirroring the current statutory rules for leaseholders) and a second option of a 990-year term.
• LiveWest will cover our own legal fees. Currently under the existing legislation, the leaseholder is liable for not only their own but also their landlords’ reasonable legal costs. Secondary legislation is required before landlords must pay their own legal fees, but LiveWest want to be an early adopter.
• LiveWest will discount the premium of the lease extension with shared owners relative to the percentage of equity we retain. This makes extending leases for shared owners more affordable. 

This is only available via the voluntary lease extension process because until secondary legislation comes into force, the statutory route must follow the rules outlined in the existing legislation. 

Find out more

If you would like to find out more, please view our lease extension overview here. To extend your lease, please contact your Homeownership Officer. 

Please note we are not able to confirm the premium payable for a lease extension as this is dependent on a formal valuation. You can, however, get an idea of how much it could be by using the calculator on the LEASE website.

Summary of costs

Following changes to the voluntary lease extension route for shared owners, LiveWest will share the premium with shared owners, relative to the equity we retain. For example: 

• Based on a valuation confirming the lease extension premium is £2,500
• A customer who owns a 40% share will now only pay £1,000
• LiveWest will waive the remaining 60% (based on the equity we retain), reducing the premium by £1,500 in this example. 

If you would like LiveWest to arrange an independent valuation for you, this will cost £400-£600. We can provide a quote in advance before you agree to proceed. 

Following feedback from LiveWest’s Shared Ownership Virtual Panel (SOVP), we have also waived our £300 administration fee.