Avoid this like the plague!

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QThe lease on my flat is rather low and my freeholder has offered to extend it at a reasonable cost , without going through usual f ormalities.

AThe thing you are describing sounds like what is known in the trade as an informal lease extension (ILE). And that being so, my advice would be to avoid it, and go for the proper, statutory lease extension to which you are entitled. Remember, under the Leasehold Reform, Housing and Urban Development Act 1993, all leaseholders have a legal right to extend their lease by an additional 90 years and reduce the ground rent to zero – provided they have held the lease for more than two years.

What’s wrong with ILEs?

Well, the underlying problem is that they are not protected by the law and are therefore far too open to abuse by dishonest or predatory freeholders, whose only goal is to try to extract as much money as possible from their unsuspecting leaseholders – under the pretence, of course, that they are offering them a bargain.

So, for example, by inserting clauses such as onerous ground rent schedules (which may double every decade), increased licence fees and service charges – not to mention the cost of the lease extension itself – freeholders can dupe leaseholders into paying sometimes many thousands of pounds more over the years than if they’d opted for the legal, statutory route.

Besides which, under an ILE, freeholders are free to extend a lease by whatever term they choose – for example, just back up to the original 99 years, rather than the extra 90 years on top of the period still remaining, to which leaseholders are actually entitled under the law.

Similarly, in cases where the outstanding balance of a lease is approaching the magic 80-year tipping point, below which freeholders are legally entitled to something called a marriage premium, in addition to the charge they make for actually extending the lease – it is not uncommon for delaying tactics to be employed.

So, landlords may initially agree to an ILE, only to then drag their heels until the lease drops below 80 years – at which point they promptly turn their back on the informal price already agreed, and demand the marriage premium as well! So, in short, I would only ever advise a leaseholder to exercise their right to an extension via the statutory route – and avoid any informal offers like the plague.