The Prime Central London Lease Extension Puzzle

For most homeowners, a lease extension is a routine part of property ownership. In Prime Central London (PCL), however, the process is anything but ordinary. Properties in Mayfair, Belgravia, Knightsbridge, and Chelsea frequently carry leasehold titles where the unexpired term is less than 80 years. In this rarefied market, extending that lease can mean paying a premium of over £1 million.

Such figures are eye-watering to many, but they reflect both the scarcity of freehold property in London’s golden postcodes and the value uplift that comes once the lease is extended. For investors, international buyers, and wealthy families, a lease extension is often not optional; it is a condition for protecting capital value and maintaining liquidity when refinancing or selling.

The difficulty lies in how to fund these seven-figure premiums. Few buyers or owners want to crystallise large sums of cash or liquidate portfolios, and most mainstream lenders will not offer mortgage products for lease extensions alone. That gap creates a highly specialised finance challenge—one where speed, liquidity, and long-term structuring all matter as much as the premium itself.

Why the Cost Is So High

The statutory mechanism for lease extensions under the Leasehold Reform Act sets out a formula where the shorter the lease term, the higher the premium payable. In Prime Central London, where flats in mansion blocks or newly refurbished developments can sell for £5 million or more, the difference between a 78-year lease and a 125-year lease can translate into a staggering uplift in value.

That uplift is exactly why lease extensions are pursued, but it is also why they cost so much. Landlords know that once the term falls below 80 years, “marriage value” is added to the premium, reflecting the increased property value post-extension.

For buyers, the calculation is simple: without extending the lease, the property may not be mortgageable at all. Many lenders refuse to consider assets with less than 70 years remaining, and even those that do may heavily restrict loan-to-value ratios. For this reason, lease extension costs are both a problem and an opportunity.

Timing Pressure and Liquidity Needs

Unlike other forms of property finance, lease extensions operate under strict statutory timeframes. Once a Section 42 notice is served, both the freeholder and leaseholder are locked into a process with legal deadlines. Missing a date can set the clock back years, adding legal costs and uncertainty to what is already a complex transaction.

This urgency explains why many clients turn first to bridging finance. A bridging loan can be arranged in a matter of weeks and provides the liquidity required to pay the freeholder’s premium before deadlines expire. We explored the mechanics of short-term lending in our article on bridging finance in 2025, but lease extensions illustrate perfectly why speed can matter more than cost. In these situations, borrowers are often willing to accept rolled-up interest for a few months in exchange for certainty of execution.

The Role of Private Banks

While bridging provides a short-term solution, long-term stability usually comes from private banks. In PCL, many properties qualify for finance that goes far beyond what high-street lenders can offer. Private banks assess a client’s global wealth profile rather than just income, allowing them to structure facilities that reflect the real economics of high-value ownership.

For instance, a borrower may bridge the initial £1.5 million lease extension cost, then refinance into a private bank mortgage once the new lease is registered. The uplift in value provides stronger collateral, and the private bank relationship often extends beyond property into wealth management and estate planning.

This holistic view is something we discussed in our blog on private client finance in 2025. For wealthy families and entrepreneurs, the lease extension is just one element of a broader financial picture that might include cross-border assets, offshore structures, or family offices.

Securities-Backed Lending: Liquidity Without Selling

Another increasingly popular option in PCL is securities-backed lending (SBL). For clients with large investment portfolios, selling assets to pay a lease extension premium can trigger unwanted tax liabilities or disrupt investment strategies. SBL offers a solution by lending against the value of equities, bonds, or other liquid securities.

Funds can often be released within days, and loan-to-value ratios typically range between 50% and 70%. For a client with a £10 million portfolio, this could mean borrowing £5 million at competitive rates—more than enough to cover the lease extension without liquidating assets.

We’ve written previously on securities-backed lending in 2025, highlighting its role in unlocking liquidity without selling investments. In the context of PCL, it is particularly powerful because it aligns property finance with broader wealth preservation goals.

Protecting the Refinance Exit

Of course, funding the extension is only half the story. The true measure of success is the refinance. If the exit strategy is not properly aligned from the start, borrowers can find themselves trapped in expensive bridging debt or facing private bank criteria they cannot meet.

This is why forward planning is essential. Valuation uplift must be assessed carefully—sometimes lenders are more conservative than anticipated, particularly in markets where pricing is volatile. We explored similar risks in our guide on bridging loan exits, where the absence of a clear plan can lead to default, penalties, and missed opportunities.

For lease extensions, the refinance exit depends on three factors: the borrower’s profile, the property’s enhanced value, and lender appetite at the time of application. The most effective strategies are those where the bridging, private bank, and legal teams are aligned from day one.

Market Trends in 2025

Current market conditions add further complexity. In August, we published a Prime Central London market update, noting that while demand remains resilient, valuation gaps are emerging between optimistic sellers and cautious lenders. For lease extensions, this means uplifts are not always guaranteed to materialise in full.

At the same time, the Bank of England’s rate cuts have shifted the calculus on long-term borrowing. As we noted in our August mortgage market update, lower rates make refinancing more attractive, but private banks remain highly selective about who they lend to.

How Willow Can Help

At Willow Private Finance, we specialise in navigating precisely these types of high-value, time-sensitive challenges. Our expertise includes:

• Bridging finance for lease extensions, arranged quickly and aligned to statutory deadlines.

• Private bank introductions for long-term refinancing, where we negotiate on terms beyond headline rates.

• Securities-backed lending solutions, enabling clients to leverage their portfolios without forced liquidation.

• End-to-end coordination with solicitors, valuers, and tax advisers to ensure the lease extension process enhances, rather than undermines, wider wealth strategies.

What sets us apart is our ability to see the whole picture. A lease extension in Prime Central London is never just a property transaction—it is a wealth event with implications for tax, inheritance planning, and future liquidity. Our role is to design finance that recognises those dimensions and protects our clients from costly mistakes.

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