Leasehold properties can be excellent long-term investments, but their value is closely tied to the length of the lease. As the remaining term shortens, a property can become harder to sell, more difficult to mortgage and less appealing to buyers. Many leaseholders only realise this when they try to sell or remortgage, by which point the cost of extending the lease may already have increased.
An informal lease extension is one way of increasing the length of a lease and protecting the long-term value of a property. This guide explains what an informal lease extension is, when it may be considered, how the process works, and the key points leaseholders should be aware of before proceeding.
“Leaseholders are often attracted to informal lease extensions because they can appear quicker and more flexible than the statutory route. However, it is important to understand exactly what is being offered, particularly where ground rent provisions or future mortgageability may be affected. Taking legal advice before agreeing terms can help avoid costly issues further down the line.”
What Is an Informal Lease Extension?
An informal lease extension is a privately negotiated agreement between a leaseholder and the freeholder to extend the term of an existing lease.
Unlike statutory lease extensions, informal extensions:
- are not governed by a fixed legal framework; and
- rely entirely on what the freeholder is prepared to offer and the leaseholder is willing to accept.
The freeholder may agree to:
- add a specific number of years to the lease; or
- grant a new lease on revised terms.
Because the agreement is negotiated outside the statutory scheme, the length of the extension, the ground rent and the wording of the lease can all vary significantly.
Who Can Apply for an Informal Lease Extension?
In principle, any leaseholder can approach their freeholder to request an informal lease extension.
There are no statutory eligibility requirements for making an informal request and no minimum ownership period. This means:
- leaseholders can explore an extension at any time; and
- informal discussions can begin even where a statutory claim is not yet available or desired.
However, because the freeholder is not obliged to agree, success depends entirely on negotiation.
When Should You Consider an Informal Lease Extension? The 80-Year Rule
As with all lease extensions, the 80-year threshold is an important consideration.
When a lease has more than 80 years remaining, extension premiums are generally lower.
Once a lease falls below 80 years, the cost of extending it can increase significantly because of something known as marriage value. Broadly speaking, this reflects the increase in a property’s value once the lease has been extended. As a result, delaying action can make a lease extension substantially more expensive.
Short leases can also create mortgage and sale issues. Many lenders impose minimum lease term requirements, which can affect a property’s marketability and limit the pool of potential buyers.
For these reasons, leaseholders are often advised to consider their options well before the lease reaches the 80-year threshold.
Is an Informal or Statutory Lease Extension Better?
One of the most common questions leaseholders ask is whether an informal or statutory lease extension is the better option.
An informal lease extension may be attractive where both parties are willing to negotiate and reach agreement quickly. It can offer flexibility and, in some cases, avoid the time and complexity associated with a formal statutory claim.
However, flexibility can come at a cost. Because there is no prescribed framework, a freeholder can propose terms that may not be favourable to the leaseholder. For example, an agreement may include ongoing or escalating ground rent provisions that could affect the property’s future value or mortgageability.
By contrast, the statutory route provides legal protections, including a prescribed process and greater certainty regarding the terms of the new lease. Whether an informal or statutory approach is most suitable will depend on the circumstances, making specialist legal and valuation advice essential before agreeing to any proposal.
The Informal Lease Extension Process: Step by Step
Although there is no fixed legal procedure, informal lease extensions typically follow a similar pattern.
1. Reviewing the Lease and Title
Your solicitor reviews the existing lease and title to confirm ownership, identify the freeholder and highlight any provisions relevant to the proposed extension.
2. Obtaining a Specialist Valuation
A surveyor experienced in lease extensions advises on the likely premium and whether the freeholder’s proposal represents reasonable value. This is particularly important as there is no statutory valuation formula.
3. Approaching the Freeholder
The leaseholder (or their solicitor) contacts the freeholder to request an extension and invite proposed terms. Discussions may be direct or conducted through representatives.
4. Negotiating Terms
The premium, length of extension and revised lease terms are negotiated.
Unlike the statutory route:
- there is no guaranteed length of extension; and
- the freeholder may insist on continuing or increasing ground rent, or introducing additional clauses.
5. Mortgage Lender Consent
If the property is mortgaged, the lender’s consent is required.
Depending on how the informal extension is structured, the lender may need to approve the new or varied lease terms and may require a Deed of Substituted Security or other lender documentation to ensure its charge remains properly secured against the property.
6. Completion and Registration
Once terms have been agreed, the premium (if any) is paid and the lease extension is completed. Any Stamp Duty Land Tax requirements are considered, and the updated lease is then registered at HM Land Registry.
Key Risks of Informal Lease Extensions
Whilst informal extensions may appear quicker or more flexible, they carry important risks:
- No guaranteed outcome – the freeholder can withdraw or change terms at any stage.
- Potentially higher long-term costs – lower upfront premiums are sometimes offset by escalating ground rent.
- Mortgageability concerns – certain ground rent clauses or review provisions may deter future lenders.
- Lack of statutory protection – there is no fixed timetable or prescribed lease terms.
For these reasons, careful legal and valuation advice is essential before agreeing to terms.
Common Pitfalls Leaseholders Should Avoid
Leaseholders considering an informal lease extension should be particularly cautious of:
- Accepting terms without first obtaining specialist valuation advice.
- Focusing solely on the premium without considering long-term ground rent obligations.
- Agreeing to clauses that could affect future mortgage lending or property sales.
- Assuming a freeholder’s offer represents fair market value.
- Relying on informal discussions rather than properly documenting agreed terms.
- Delaying action until the lease term has reduced significantly.
Identifying these issues at an early stage can help prevent unexpected costs and complications later.
Frequently Asked Questions
How Much Does an Informal Lease Extension Cost?
The overall cost may include:
the premium paid to the freeholder;
- your legal fees;
- the freeholder’s legal and valuation costs;
- a specialist valuation fee; and
- Land Registry fees and any applicable Stamp Duty Land Tax.
Premiums can vary widely because they are entirely negotiable and depend on the freeholder’s approach, lease length, ground rent and property value.
How Long Does an Informal Lease Extension Take?
Timescales vary significantly. Some extensions are completed within a few months, whilst others can take much longer depending on the complexity of negotiations.
Can a Freeholder Refuse an Informal Lease Extension?
Yes. The freeholder is under no obligation to agree to an informal extension and may refuse the request or propose alternative terms as a condition of agreement.
Can Informal Extensions Affect Future Sales or Mortgages?
Yes. Certain ground rent provisions and review clauses can make a property harder to mortgage or sell in the future, which is why proposed terms should always be reviewed carefully.
Is a Valuation Still Necessary?
Yes. A professional valuation is strongly recommended to assess whether the proposed terms represent fair value and to help inform negotiations.
How Wolferstans Can Help
At Wolferstans, we regularly advise leaseholders on both informal and statutory lease extensions. Our Residential Property team can review the terms being offered, work alongside specialist valuers where required, liaise with mortgage lenders and help ensure that any proposed extension protects both the value and future marketability of your property.
Every situation is different, and there is rarely a one-size-fits-all solution. Whether you are approaching the 80-year threshold, preparing to sell, remortgaging, or simply exploring your options, obtaining expert advice at an early stage can help you make an informed decision and avoid costly mistakes.
Final Thoughts
An informal lease extension can be a viable option in some circumstances, but it requires careful consideration. Whilst it may appear quicker or more straightforward than pursuing a statutory claim, it does not provide the same level of certainty or protection.
Before agreeing to an informal lease extension, leaseholders should always obtain independent legal and valuation advice to ensure the terms are fair, mortgage-compatible and appropriate for their long-term goals. With the right guidance, an informal lease extension can help protect and enhance the value of a property, but only if approached with caution and a clear understanding of the implications.