Are you the owner of a residential flat on a long lease basis? If you are, you’re not alone. There are an estimated 1.5 million properties in England and Wales owned on a leasehold basis – and just like you, at some point the owners of all of those properties will have to either get around to extending their lease, or face seeing the lease expire.
Many people simply do not realise that if they have owned a residential flat for two years on a long lease (which means any lease originally granted for at least 21 years, most commonly a 99 or 125 year term), they are likely to qualify for the right to extend their lease by a further 90 years – provided they have owned the flat for at least two years.
(NB Even if you haven’t only the lease for that long, you may still be able to negotiate an informal lease extension with your freeholder.
As property prices are continuing to rise in most parts of the country, now is the right time for leaseholders of flats to think about extending their lease.
However, often there doesn’t seem to be any hurry to extend a lease, and it can be an expensive process. So what is the best time to extend your lease?
Want to know more about extending your lease? Call our highly specialist lease extension solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice – with no strings attached.
Anyone wishing to improve the value and saleability of their flat, especially if they are thinking of selling in the near future, should consider taking the following steps:
• Once the remaining term of the lease has dropped below 90 years, it’s worth considering a leasehold extension. However if the remaining term drops just one single day below 80 years, then the price increases significantly. That’s because as soon as the lease drops below 80 years, your freeholder is allowed to charge an additional premium to extend your lease – called “marriage value”. So if you have a lease term with between 80 and 85 years remaining, you would be well advised to extend your lease now, or at least as soon as possible.
• Extending a lease can make it much easier to sell. Buyers are becoming more concerned about the length of the lease and whether the block is well managed. In the current housing market, mortgage lenders are also tightening lending criteria and are proving increasingly reluctant to offer mortgages on flats with short leases. In addition purchasers are often willing to pay more for a longer lease.
Click here to find out more about the very real problems of getting a mortgage on a short lease flat.
• In addition to the fact that the lower your lease term gets, the more it’s going to cost to extend your lease, you also need to bear in mind that with rising property prices that will also increase the value of the premium. So putting off extend your lease, means the premium you’re eventually going to have to pay is being driven steadily higher by both of those 2 factors – and that’s why getting a lease extension sooner rather than later once it dips below the magic 80 year stage, should be a good bet
• Unless you can reach agreement with your landlord on the price of your lease extension premium, our specialist team always advises our clients to get a formal valuation from a specialist surveyor early on. This can help increase your negotiating power and will make sure you don’t pay over the odds in extending your lease.
We regularly work with a number of highly specialist lease extension valuation surveyors nationwide – and we are happy to introduce you to them, and instruct them to prepare a valuation for you, as part of our one-stop shop lease extension service.
Click here to read more about the critical importance of instructing the right lease extension surveyor.
• If negotiations don’t succeed, then getting the right valuation from the right surveyor will also provide evidence in any subsequent application to the First Tier Property Tribunal [ previously known as the Leasehold Valuation Tribunal or LVT] to set the right level of the premium payable to your freeholder.
Click here to read more about the First Tier Property Tribunal.
• The price of extending a lease with over 80 years left is often not great, and will be much cheaper than waiting until the term drops under 80 years. In addition to legal costs, any tenant must pay compensation to the freeholder for the loss their freeholder suffers as a result of a lease extension (i.e. the difference in the value of the flat before and after the 90 year lease extension is granted) along with the freeholder’s reasonable costs and any valuation expenses.
• Too many people leave extending their lease too late. Often they put it off because it doesn’t seem urgent and then become surprised at how much a lease extension will cost. Plus the fact that when you come to sell your flat, if your lease is getting short, it’s going to be tough to sell. In fact, many people find it incredibly frustrating to discover that going through the formal or such lease extension process can regularly take six months – in which case you may have to put off selling your current flat now and trading up to buy your dream home simply to have enough time to extend your lease.
Want to know more about the lease extension process?
Click here to read more about the Process of Extending the Lease on your Flat?
Any tenants with concerns that their block is poorly managed or who thinks that their management charges are too high, might also want to consider exercising their right to manage.
Click here to read more about how our right to manage solicitors can help leaseholders like you to acquire the ability to manage your own block.