Leasehold Advice
Statutory vs Informal Lease Extension: Which Route to Take
Two routes lead to a longer lease: the statutory route under LRHUDA 1993, and an informal voluntary deal with the freeholder. This guide explains each, compares the costs and timescales, and flags where LAFRA 2024 has changed the picture.
The Two Routes
A leaseholder who wants to extend the lease on their flat has two options: the statutory route, which is a formal legal claim under the Leasehold Reform, Housing and Urban Development Act 1993, or an informal route, which is a voluntary deal negotiated with the freeholder. Both produce a longer lease at the end. The difference is in how they get there, what protections they offer along the way and what the final terms look like.
The statutory route is set by law. It gives the leaseholder a right to a 90-year extension on top of the existing term at a peppercorn ground rent, with the premium determined by a valuation methodology and a tribunal as backstop if the parties cannot agree. The informal route has no legal backstop: the term, the ground rent and the premium are all open to negotiation, and the freeholder can refuse to engage. Informal extensions are usually faster and can be cheaper, but they come without the protections that the statutory route builds in.
The choice between the two depends on the leaseholder's position. A bad relationship with the freeholder, a lease below 80 years (where marriage value adds significantly to the premium) or a desire for legal protection usually push towards the statutory route. A good relationship, a fairly long remaining term, time pressure to complete or the prospect of a more generous deal (such as 999 years on top) usually push towards the informal route.
This guide describes both routes for leasehold flats in England and Wales, covers the practical decisions, and flags where the Leasehold and Freehold Reform Act 2024 changes the picture (and where it does not, because some of the headline reforms are still pending commencement).
The Statutory Route
The statutory lease extension is the leaseholder's right, not a privilege of negotiation. Where the qualifying conditions are met, the freeholder must grant the new lease on the statutory terms. The headline terms are fixed: 90 years added to the existing term, a peppercorn (nominal) ground rent and a premium calculated according to a statutory valuation methodology.
Who qualifies
The right applies to leaseholders of a flat held under a long lease, which means a lease originally granted for more than 21 years. There is no longer a two-year ownership requirement: a new owner can serve a Section 42 notice immediately, following the abolition of that rule by the Leasehold and Freehold Reform Act 2024 with effect from 31 January 2025. A few categories sit outside the right: Crown and National Trust properties, business premises, certain charity properties. Shared ownership leases follow their own process and do not benefit from the standard statutory route until the leaseholder has staircased to 100 percent.
Serving the Section 42 notice
The process starts with a Section 42 notice served on the freeholder. The notice sets out the leaseholder's claim, the proposed premium and the address details. Drafting a valid notice is technical: errors invalidate the claim and the leaseholder cannot serve another for a year. Most leaseholders use a specialist solicitor and a chartered surveyor to value the flat before serving.
The freeholder's counter-notice
The freeholder has at least two months to serve a counter-notice (a Section 45 notice). The counter-notice either accepts the claim, accepts the claim but disputes the premium, or denies the claim altogether. Most counter-notices accept the claim and dispute the premium: the parties then enter a window of negotiation. Either side can apply to the First-tier Tribunal between two and six months after the counter-notice; if no application is made within that six-month window, the claim lapses.
How the premium is calculated
The premium has three components. The first is the diminution in the value of the freehold caused by extending the lease (the freeholder loses ground rent income and pushes back the reversion). The second is the freeholder's share of the marriage value, which is the additional value the extension creates: where the unextended lease is below 80 years at the date of the notice, the freeholder is entitled to 50 percent of that uplift. The third is any other compensation due (rare in normal flat cases). Marriage value is what makes extensions on leases below 80 years much more expensive: extending sooner, while the lease is still above 80 years, removes that element from the calculation.
Costs the leaseholder pays
On the statutory route the leaseholder pays the freeholder's reasonable valuation and legal costs as well as their own. Typical out-of-pocket costs for a straightforward flat range from £3,000 to £6,000 in professional fees on each side, plus the premium itself. Tribunal costs add to this if the case goes that far. The Leasehold and Freehold Reform Act 2024 contains a reform that would mean each side bears its own legal costs, but that reform has not yet commenced.
The tribunal route
If the parties cannot agree on the premium, either side can apply to the First-tier Tribunal (Property Chamber). The Tribunal holds a hearing and determines the premium on its own evidence (typically from both sides' surveyors). Tribunal cases add 4 to 8 months to the overall timeline and several thousand pounds to the costs, but the outcome is a binding decision. Most cases settle before a final hearing; the existence of the tribunal route is itself what drives most cases to agreement.
If the freeholder is missing or uncooperative
Where the freeholder cannot be traced, there is a special procedure under the LRHUDA 1993: the leaseholder applies to the County Court for an order dispensing with service of the notice, the court grants a vesting order, and the First-tier Tribunal determines the terms of the new lease. Where the freeholder simply ignores the notice (no counter-notice), the leaseholder can apply to the County Court for a vesting order on the terms in the notice. Both routes are slower than a normal extension but they ensure the claim cannot be blocked by a non-engaging freeholder.
The Informal Route
An informal lease extension is a voluntary negotiation between the leaseholder and the freeholder. There is no statutory framework: the term, the ground rent and the premium are all open. The deal is recorded in a deed of variation to the existing lease, or in some cases a surrender and re-grant of a fresh lease. The result is a longer lease, but on whatever terms the parties agreed.
How an informal extension typically works
The leaseholder approaches the freeholder (often via the managing agent) with a proposal: a specific extra term and a premium. The freeholder responds with their own view of the premium and any changes to the lease terms they want as a condition. The two sides negotiate, sometimes via their solicitors, until a draft deed of variation is agreed. The deed is signed, the premium is paid, and the new lease length is registered with the Land Registry. Total elapsed time from first approach to completion is typically 4 to 12 weeks.
Common informal terms
The most common informal terms mirror the statutory ones: 90 years added to the existing lease at a peppercorn ground rent. The freeholder agrees to take essentially the statutory deal to avoid the cost and delay of a Section 42 process. Some freeholders offer longer (99 years or 999 years on top) in exchange for a higher premium or retention of a modest ground rent. A small minority of freeholders try to use the informal route to retain or modernise the ground rent (RPI-linked, or doubling at intervals) at a lower premium; that is rarely a good deal for the leaseholder and should be checked carefully by a specialist solicitor.
What the leaseholder can negotiate
Everything is in theory negotiable. The term added is the headline; longer terms (e.g. 999 years) reduce the need for any future extension. The ground rent should be reduced to a peppercorn; anything else changes the economics of the deal and may make the flat harder to sell or remortgage. The premium is the practical battleground: a leaseholder armed with a chartered surveyor's valuation has a much stronger position than one who simply asks the freeholder what they want. Other lease terms can be tidied up while the deed is being drafted, but freeholders may charge separately for those changes.
Costs the leaseholder pays
Typically the leaseholder pays their own solicitor's costs (£1,000 to £2,000) and their own surveyor's costs (£500 to £1,500). The freeholder's legal costs are sometimes added to the premium and sometimes paid separately. Total out-of-pocket fees are usually less than on the statutory route, particularly where no surveyor's report is commissioned (which the leaseholder should still do for any extension of meaningful value).
What can go wrong
The biggest risk is that the freeholder withdraws or changes terms at any point before completion. The leaseholder has no right to force the deal through; only the statutory route does that. A second risk is that an informal extension on poor terms (retained ground rent, short additional term) will surface on a future sale and reduce the value of the flat. A third is that the marriage-value calculation in an informal deal is opaque: the leaseholder may end up paying more in premium than they would have done on the statutory route, particularly close to the 80-year threshold.
Choosing Between Them
Neither route is the right answer for every case. The choice depends on the leaseholder's position, the freeholder's behaviour, the lease length, the time pressure and the appetite for negotiation.
When the statutory route is usually right
The statutory route is usually the right call where the lease is close to or below 80 years (marriage value protection through formal valuation matters), where the freeholder is uncooperative, missing or aggressive, where the leaseholder wants the certainty of a peppercorn ground rent and a 90-year extension, or where a previous informal attempt has stalled. The statutory route is also the right call where the freeholder is offering an informal deal on terms that look worse than the statutory ones.
When the informal route can work
The informal route can be a good choice where the relationship with the freeholder is constructive, where the lease has a long enough remaining term that marriage value is not yet a factor (well above 80 years), where the leaseholder has a sale or remortgage coming up and cannot wait for the statutory process, or where the freeholder has volunteered terms that match or beat the statutory deal (e.g. 999 years on top at a peppercorn).
A practical decision framework
The decision usually turns on a small number of factors. First, the lease length: above 80 years, the case for the informal route is stronger; below 80, the statutory route's valuation discipline becomes more valuable. Second, the freeholder's stance: a freeholder who returns calls and engages constructively suits the informal route; one who does not, suits the statutory route. Third, time: a sale in the next three months pushes towards informal; no time pressure favours statutory. Fourth, the deal on offer: where the freeholder volunteers genuinely better terms (longer extension, lower premium) than the statutory route would deliver, informal can be the better answer.
The hybrid play
A common practical approach is to start with an informal proposal but be ready to switch to statutory if it stalls. Serving a Section 42 notice signals that the leaseholder is serious; some freeholders agree better informal terms at that point to avoid the statutory process. The leaseholder needs to be careful not to spend too much on professional fees on the informal route before deciding whether to switch, because those costs are not recoverable.
LAFRA 2024: What Has and Has Not Changed
The Leasehold and Freehold Reform Act 2024 received Royal Assent on 24 May 2024. Some of its provisions have commenced; others have not. The picture matters for any leaseholder considering an extension, because the reforms are designed to make extensions cheaper and quicker, but most of those reforms are still on the shelf.
What has commenced
The two-year ownership requirement for statutory extensions and collective enfranchisement has been abolished with effect from 31 January 2025. A new owner can now serve a Section 42 notice immediately. Right-to-manage changes (the 50 percent non-residential limit and the costs reform) commenced on 3 March 2025. These are real improvements, but they are at the edges of the lease-extension process rather than at its core.
What has not yet commenced
The headline reforms are still pending. The new 990-year extension term (replacing the 90-year addition) has not commenced. The abolition of marriage value (which would significantly reduce the premium for leases below 80 years) has not commenced. The standardised valuation methodology has not commenced. The reform under which each side bears its own legal costs (rather than the leaseholder paying both) has not commenced. These provisions are held back pending the resolution of a judicial review challenge brought by freeholders, and further secondary legislation.
What this means for someone extending now
An extension done today follows the existing rules: 90 years added under the statutory route (not 990), marriage value still applies below 80 years, and the leaseholder still pays the freeholder's reasonable costs. Whether to wait for the reforms is a judgement call. The premium reduction from marriage value abolition is real for some flats but the commencement date is unknown, and a lease running down through the 80-year threshold gets more expensive to extend with every month that passes. For most leaseholders below 85 years remaining, the safer call is to extend now rather than wait.
How an Extension Affects a Sale
Lease length is one of the first questions a buyer's solicitor will ask, and one of the first numbers a lender's valuer will check. The route used to extend matters less than the resulting lease length and ground rent, but it can shape the practical timing of a sale.
The lender's view
Most mainstream lenders ask for a remaining lease term well above the mortgage term: a common rule of thumb is the mortgage term plus 40 years, so a 30-year mortgage typically needs 70+ years remaining. Some lenders ask for higher (e.g. 80+ or even 90+ years). Below 80 years, lenders pay close attention to marriage value and the cost of extending; below 70 years, many mainstream lenders will not lend at all. After an extension, the new lease length usually puts the flat firmly back in the mainstream lender market.
Selling mid-extension
A statutory extension can be completed before sale if there is time, or the benefit of the Section 42 notice can be assigned to the buyer on completion. The assignment is a documented step in the conveyancing pack and the buyer's solicitor will know how to handle it. The buyer then completes the extension after taking title. The price reflects the cost of completing the extension. An informal extension is harder to assign: there is no statutory right to do so, and the freeholder may want to start again with the new owner. Most sellers in informal-track cases either complete the extension first or let the buyer handle the extension as a separate negotiation after completion.
Pricing impact
A flat with a long lease (over 100 years, peppercorn ground rent) sits in the mainstream market and prices accordingly. A flat with a short lease (below 80 years) typically sells at a discount that reflects the premium the buyer will pay to extend, plus a risk premium for the inconvenience. The discount is often deeper than the bare cost of extension: lenders are warier, buyer pools narrow, and an unextended short-lease flat can sit on the market for a long time. A completed extension lifts the flat back into the normal market.
The cash-buyer route for short-lease flats
Where a flat has a short lease and the seller does not want to extend before selling (because of time, cost, or simply not wanting the hassle), a cash buyer can purchase as-is and handle the extension after completion. The price reflects the cost the buyer is taking on. For sellers under time pressure (probate, relocation, financial pressure, a sale chain), this is a working option.
Relevant Legislation
Lease extensions sit on a long-standing legal framework that has been updated several times. The main statutes are:
The Leasehold Reform, Housing and Urban Development Act 1993 is the core statute for the statutory lease extension. It sets out the qualifying conditions, the Section 42 notice procedure, the freeholder's counter-notice obligations, the valuation methodology, the marriage value rules and the tribunal route. The 1993 Act has been amended many times since, most significantly by the Commonhold and Leasehold Reform Act 2002 and the Leasehold and Freehold Reform Act 2024.
The Commonhold and Leasehold Reform Act 2002 simplified the statutory route, removed some of the original qualifying restrictions and introduced the First-tier Tribunal route for premium disputes (replacing the Leasehold Valuation Tribunal in due course).
The Leasehold and Freehold Reform Act 2024 received Royal Assent on 24 May 2024. The two-year ownership requirement was abolished with effect from 31 January 2025 (sections 27 and 28). The headline reforms (990-year extension term, abolition of marriage value, standardised valuation methodology, costs reform) have not yet commenced; implementation has been staged, with some provisions still pending secondary legislation and the resolution of a judicial review challenge brought by freeholders.
The Leasehold Reform Act 1967 covers the equivalent rights for leasehold houses (not flats), and gives the right to a freehold purchase or an extended lease. It is mentioned here for context; flats sit under the 1993 Act, not the 1967 Act.
Future legislation: a draft Commonhold and Leasehold Reform Bill is in development. Its content and timetable are not yet confirmed.
Further Reading
Two related guides sit alongside this one: the practical step-by-step on how to extend (covering the statutory route in detail), and the should-I-extend decision guide for sellers comparing extension vs sale as-is.
Frequently Asked Questions
A statutory extension is a formal legal claim under the Leasehold Reform, Housing and Urban Development Act 1993. The leaseholder serves a Section 42 notice on the freeholder, and the law sets the terms: 90 years added to the existing lease, ground rent reduced to a peppercorn (nominal amount), with the premium determined by a valuation methodology if the parties cannot agree. The First-tier Tribunal can resolve disputes. An informal extension is a voluntary deal negotiated between the leaseholder and the freeholder with no statutory backstop. The term length, the ground rent and the premium are all negotiated; the freeholder can refuse to engage at all. Informal extensions are often faster and cheaper, but offer none of the legal protections of the statutory route.
Typically 6 to 12 months from the date the Section 42 notice is served, assuming the case does not need a full tribunal hearing on the premium. The freeholder has at least two months to serve a counter-notice; the parties then have a window to negotiate or refer the premium to the tribunal; completion follows once the premium is agreed or determined. Where the freeholder is missing or uncooperative, the timeline lengthens. Where everything is straightforward, completion can be reached in around 6 months.
Typically 4 to 12 weeks once the freeholder has agreed terms. The bulk of the time is spent agreeing the premium and the form of the deed of variation, then the leaseholder's solicitor and the freeholder's solicitor complete the deed. Informal extensions can move faster than statutory ones because there is no formal notice period and no tribunal process; the downside is that the freeholder can stall or change terms at any point until completion.
It depends. On the statutory route the leaseholder pays the freeholder's reasonable valuation and legal costs as well as their own; on the informal route the leaseholder usually only pays their own (although the freeholder may try to recover theirs through the premium). The premium itself can go either way: an informal premium can be higher because the freeholder knows the leaseholder is trying to avoid the costs and delays of the statutory route; an informal premium can be lower if the freeholder wants a quick deal and a longer term. The right comparison is the leaseholder's total cost (premium plus all professional fees), not just the premium.
No. The Leasehold and Freehold Reform Act 2024 abolished the two-year ownership requirement with effect from 31 January 2025. A new owner can now serve a Section 42 notice immediately, without waiting two years from the date of acquiring the lease. This is one of the LAFRA 2024 provisions already in force; some of the other headline reforms (the 990-year extension, abolition of marriage value, valuation reform) are still pending commencement.
Marriage value is the additional value created when a short lease is extended. The premium for the extension is calculated by reference to the gap between the value of the existing short lease and the value of the new long lease, and where the lease is below 80 years remaining at the date of the Section 42 notice, the freeholder is entitled to 50 percent of that uplift. This makes lease extensions on leases below 80 years much more expensive than extensions on leases above 80 years. The 80-year threshold still applies. LAFRA 2024 abolishes marriage value in principle, but this reform has not yet commenced.
Partly. The two-year ownership requirement has gone (since January 2025) so a buyer can now extend immediately. Right-to-manage changes have also commenced. The bigger reforms (extending by 990 years rather than 90, abolition of marriage value, a standardised valuation methodology and a costs reform that would mean each side bears its own legal costs) have not yet commenced. The position should be checked at the time it matters because the commencement timetable for the remaining reforms is unsettled.
Yes. An informal extension is a voluntary deal and the freeholder has no obligation to agree to one. Some freeholders prefer the informal route because it avoids the statutory tribunal process; others prefer the statutory route because it produces a clear outcome on terms set by law. If the freeholder refuses to engage with an informal proposal, the leaseholder can fall back on the statutory route, which the freeholder cannot block (subject to a valid Section 42 notice and meeting the qualifying conditions).
Yes, with care. On the statutory route, a leaseholder who has served a valid Section 42 notice can assign the benefit of that notice to a buyer on completion of the sale, so the buyer can complete the extension themselves. The seller's solicitor and the buyer's solicitor handle the assignment as part of the conveyancing. On the informal route, the position is less clean: there is no statutory right to assign a half-negotiated deal, and the freeholder may want to start again with the new owner. Many sellers in either situation prefer to either complete the extension before exchange (if time allows) or to factor the extension cost into the sale price and leave the extension to the buyer to handle.
If the freeholder does not serve a counter-notice in response to a valid Section 42 notice, the leaseholder can apply to the County Court for a vesting order: the court can effectively grant the new lease on the terms in the original notice. This is the statutory protection against a freeholder simply ignoring the claim. Where the freeholder is missing altogether (cannot be traced), there is a separate procedure under the LRHUDA 1993: the leaseholder applies to the County Court for an order dispensing with service, the court grants a vesting order, and the First-tier Tribunal determines the terms of the new lease. Both routes work but are slower and more involved than a normal extension where the freeholder engages.