When Should I Consider Extending my Lease?
A lease is known as a ‘diminishing asset’ because the length of the term remaining reduces each year and consequently so does its value. A general rule is that there should be at least 80 years remaining on the term of the lease for it to be acceptable to a buyer of the property, although some mortgage lenders’ requirements differ. If, when you come to sell the property there is less than 80 years remaining then you may have to purchase an extension of the lease from the landlord. Not only that, but as well as lenders’ requirements, different buyers will have different views on the length of lease that is acceptable and some are now even requesting lease extensions where the term has fallen below 100 years
The law (mostly contained within Leasehold Reform, Housing and Urban Development Act 1993) provides most leaseholders the right to purchase a lease extension, and also deals with how the price payable to the landlord should be calculated. This is a very scientific calculation. It is important to remember that the law also allows a landlord to charge a higher price for extending a lease where there is less than 80 years to run, and the difference could be substantial.
It follows that you should consider extending the lease before it reduces below 80 years because the premium will be less expensive. In order to qualify for a lease extension you must have owned your flat for at least two years. The process will involve serving a notice of your intention on the landlord and instructing a surveyor to calculate the premium for you.
The result will be that the lease term is extended by a period of 90 years and any ground rent payable will cease to apply, though you may wish to try to negotiate a lower premium for a shorter extension or an adjustment of the ground rent figure.
If you have any questions regarding the extension of your Lease, or would like to begin the Statutory process required to do so, please do not hesitate to contact one of our Residential Real Estate experts on 01279 755777.