Informal vs Statutory Lease Extensions: Which Route Is Safer?
When a leaseholder approaches a freeholder about extending their lease, there are usually two routes:
1. Informal (voluntary) agreement
2. Formal statutory claim under the Leasehold Reform, Housing and Urban Development Act 1993
The difference is significant.
The Statutory Route
Under statute, qualifying leaseholders are entitled to:
• A 90-year extension • Ground rent reduced to a peppercorn • A defined valuation framework • Tribunal protection if terms cannot be agreed
The process is structured and legally enforceable.
The Informal Route
Freeholders often offer:
• Smaller extensions (e.g. 20–40 years) • Retained or increased ground rent • Modern ground rent escalation clauses • Fewer legal protections
Premiums may appear competitive at first glance but can be distorted by ground rent terms.
Where Leaseholders Go Wrong
Common mistakes include:
• Accepting escalating ground rents • Not comparing statutory valuation benchmarks
• Failing to model long-term resale implications • Underestimating negotiation leverage
Why Independent Valuation Matters
A freeholder’s proposal is not neutral advice.
An independent valuation:
• Establishes a statutory benchmark • Tests whether the informal offer is genuinely competitive • Protects long-term asset value
Even where an informal deal is agreed, it should be measured against statutory entitlement.
Olden Property advises leaseholders across London and the South East, providing valuation reports and negotiation strategy in accordance with RICS professional standards.