Receiving an informal offer from your freeholder to extend your lease might seem like a convenient and tempting shortcut. It could even come with the promise of a quicker process or a lower headline cost. But is it the right choice?
This guide will help you understand what informal offers are, why they must be approached with caution, and how they compare to the statutory (formal) route. It also highlights common pitfalls, practical steps to take if you’ve received an offer, and how to ensure your long-term interests are protected.
What Is an Informal Lease Extension Offer?
An informal lease extension offer is a voluntary proposal made directly by your freeholder — outside of the statutory framework. These offers:
- Are not governed by the Leasehold Reform, Housing and Urban Development Act 1993
- Can vary in lease length, ground rent, and cost
- May not follow the same legal protections as the statutory route
Typically, the freeholder offers to extend the lease in exchange for a premium (payment), but the terms can include ongoing ground rent or other clauses that significantly reduce long-term value.
Why Freeholders Make Informal Offers
Informal offers are often made because they allow freeholders to:
- Retain ground rent (e.g., doubling every 10 or 20 years)
- Give shorter extensions (e.g., a new 99 or 125 year lease)
- Avoid statutory restrictions (like reducing ground rent to zero)
- Control the process and timeline to their benefit
These offers may appear convenient or slightly cheaper upfront — but usually favour the freeholder more than the leaseholder.
Common Terms to Watch Out For
Be cautious of the following in an informal offer:
📈 Escalating Ground Rent
- Rents that double every 10 or 15 years
- Rents linked to inflation (e.g., Retail Price Index)
These clauses make your flat less attractive to buyers and mortgage lenders.
⏳ Shorter Lease Extension
- Less than 90 years added
- May not significantly improve resale value or mortgageability
🧾 New Fees and Restrictions
- Administration charges
- New covenants or restrictions not in your original lease
Case Study: Informal Offer Gone Wrong
Mark received an informal offer from his freeholder to extend his 78-year lease by 90 years. The premium seemed reasonable, but the existing ground rent which doubled every 25 years was kept in the new deal.
At first glance, the deal looked good. But when he went to remortgage, his lender rejected the application due to the escalating ground rent clause. Mark had to renegotiate, incurring additional legal and surveyor fees — and ultimately paid more than if he had taken the statutory route from the start.
How the Statutory Route Compares
The statutory lease extension route offers far greater protections:
- Adds 90 years to your current lease term
- Reduces ground rent to zero (peppercorn)
- Follows a clear legal process with timelines
- Allows you to dispute terms at Tribunal if necessary
Under the statutory route, your freeholder must respond to your notice and cannot impose hidden clauses or retain ground rent.
What Should You Do If You Receive an Informal Offer?
Step 1: Don’t Sign Anything Yet
Even if the offer looks attractive, avoid signing or accepting terms until you’ve taken professional advice.
Step 2: Get a Valuation
Instruct a RICS-accredited surveyor to value the lease extension. This helps you understand whether the offer is reasonable.
Step 3: Consult a Leasehold Solicitor
A specialist solicitor can:
- Review the terms
- Identify red flags (escalating ground rent, unfair restrictions)
- Help you understand your legal options
Step 4: Consider Serving a Section 42 Notice
If the offer is poor or negotiations break down, serve a statutory notice to trigger a formal lease extension with full legal protections.
Can You Negotiate an Informal Offer?
Yes — you can always negotiate informal terms. Some leaseholders secure:
- A longer extension
- Reduced or removed ground rent
- Improved clauses
However, even with negotiation, statutory extensions remain the safer choice in most cases.
FAQs
Can I start with an informal offer and then go formal?
Yes — but if negotiations stall, your solicitor must restart the statutory process from scratch. Early action saves time. Some freeholders, including the majority of councils will not engage in informal discussions and you may have no option at all.
Will lenders accept informal extensions?
Some may, but only if the terms are favourable (e.g., no ground rent). Escalating or onerous terms may lead to mortgage refusals.
Why do informal offers often look cheaper?
Because they include continuing income for the freeholder, such as ongoing ground rent. Over time, they usually cost more.
Are informal lease extensions quicker?
They can be — but if the terms are unfair or contested, disputes can delay completion more than the formal process.
Summary: Statutory vs Informal Lease Extensions
| Feature | Statutory | Informal |
| Lease Length | 90 years added | Negotiable, often less than statutory |
| Ground Rent | Reduced to £0 | Often retained |
| Legal Protections | Strong | Minimal |
| Dispute Resolution | Tribunal | None (unless you start formal process) |
| Mortgageable | Preferred by lenders | Sometimes rejected |
Expert Advice: When to Go Informal (and When Not To)
Consider informal offers only if:
- You are confident about the terms
- Your surveyor confirms the premium is fair
- Your solicitor has reviewed the lease thoroughly
Avoid informal offers if:
- The lease is close to getting below 80 years (marriage value risk)
- The ground rent increases
- You’re planning to remortgage or sell soon
Ready to Protect Your Investment?
If you’ve received an informal offer, don’t rush in. At Extension.Lease, we help leaseholders assess offers, negotiate better terms, and initiate secure statutory lease extensions that protect your property’s value.
