Lease Extension or Collective Enfranchisement: What’s the Right Step for You?
Jul 10
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If you’re a leaseholder with a flat in England or Wales, chances are you’ve started to hear phrases like lease extension, section 42 notice, or collective enfranchisement. Perhaps you’ve also noticed the ground rent on your lease increases with RPI or even doubles every 10 years. These are common red flags that indicate it’s time to look at the options available to you, before those issues cause problems with the sale of the flat or a remortgage.
But where should you start—by extending your lease or by buying the freehold with your neighbours? In this guide, we break down the basics, and look at why each option may be better suited to your individual situation, to help you make an informed decision.
It goes without saying that you will need legal advice on your exact circumstances but we hope that this post is a useful starting point.
What Is a Lease Extension?
A lease extension adds 90 years to your existing lease term and reduces ground rent to a peppercorn (i.e., zero). This is done by serving a Section 42 notice under the Leasehold Reform, Housing and Urban Development Act 1993. It’s a common route for leaseholders looking to protect the long-term value of their flat, and it is crucial to do this if at all possible before the lease drops below 80 years, to avoid paying marriage value to your freeholder.
At Peppercorn Law, we offer a fixed fee lease extension service inclusive of all legal costs, helping you avoid costly hourly fees and surprise charges.
What Is Collective Enfranchisement?
Collective enfranchisement is a legal right that allows leaseholders in a block of flats to work together and buy the freehold from the current landlord. The landlord does not have to agree to sell; hence this is a powerful right with parallels to compulsory purchase.
This gives the group control over maintenance decisions, choice of managing agent and insurance provider. The savings really start to stack up when these expenses are controlled by those affected by them.
If you qualify, Peppercorn Law can guide you through the process with our specialist collective enfranchisement service, which is unique in that we don't add opaque disbursements or charge on an hourly basis unlike traditional firms.
When Should You Consider Extending Your Lease?
The critical threshold is 80 years. Once your lease term drops below this, something called marriage value kicks in. Marriage value is the increase in property value that occurs when a short lease is extended—and under current law, you must pay 50% of this uplift to the freeholder. Extending your lease before this point can save you thousands. There is talk of abolishing marriage value but at the time of writing, we have been waiting 5 years already and there are no signs that changes are coming any time soon.
If your lease is nearing 80 years, acting quickly with a Section 42 notice can lock in your valuation date, even if negotiations continue later.
The Problem with Doubling or RPI-Linked Ground Rents
Modern leases often contain unfair terms such as doubling ground rent or RPI-linked ground rent. These escalating charges can seriously affect the saleability of your flat as more and more buyers (and their conveyancers) become aware of the problem.
A section 42 notice effectively removes these issues by reducing ground rent to a peppercorn.
Why Some Leaseholders Choose to Buy the Freehold
Owning the freehold gives you and your neighbours full control over the building. You’re no longer subject to managing agents appointed by the freeholder or unpredictable service charges.
It’s particularly attractive if you’re unhappy with how your block is being run, for example if the building is in a poor condition or if we see a real lack of quality in the repairs being carried out, with no accountability.
It also goes without saying that the legal costs of a freehold purchase shared between four flat owners will be much lower than the costs of four individual lease extension claims, giving a strong incentive to drum up support between your neighbours.
Perhaps the biggest incentive of them all is the ability to grant the participating leaseholders 999 year leases at a nil ground rent, which is a benefit enjoyed by those that partake in and share the costs of the group effort to wrest control of their freehold.
When should I opt for a section 42 notice instead?
It may be the case that you cannot form a group of interested leaseholders that is large enough to buy the freehold or there could be a flat with a short lease that isn't participating, which will add a huge amount to the freehold purchase price.
In this case it is simply better to go it alone and extend your lease without relying on the cooperation of others.
Can You Do Both?
Yes—many leaseholders extend their lease and participate in collective enfranchisement.
Whilst you would have effectively paid double costs by extending your lease and then participating in buying the freehold, your share of the premium will be minimal or even less than £100 if you have zero ground rent and have already added 90 years to your lease. you can also share in the benefits of being involved in management.
Further, selling a flat without a share of freehold can be a disadvantage if the conveyancing process reveals that other flats have this benefit.
How Peppercorn Law Can Help
At Peppercorn Law, we specialise in both fixed fee lease extensions and collective enfranchisement. Our services are modern, we work for clients all over the country using remote on boarding, we are efficient, and transparent, with no VAT and no hidden costs.
We handle:
Section 42 notices
Lease valuation referrals
Coordination with surveyors
Serving claim notices
Legal representation in negotiations and Tribunal proceedings
Explore our services:
Final Thoughts
Whether you’re worried about an RPI ground rent clause, a lease dipping under 80 years, or increasing service charges, it pays to act early rather than wait on never ending promises of reforms that still seem years away. Extending your lease or joining together with neighbours to purchase your freehold can protect your investment and give you long-term peace of mind.
Not sure where to start? Contact Peppercorn Law for expert, fixed-fee advice and a clear plan of action depending on your specific circumstances. We are a Brighton based solicitor firm that serves leaseholders nationwide.