Lease Extensions
As a lease gets shorter, a property’s value generally decreases. Whilst this may not directly affect you whilst living in the property, short leases can be troublesome when either re-mortgaging or selling.
You may be thinking that 80-85 years sounds like a long time, however, this is dangerous territory. If a lease falls below 80 years the cost of extension can drastically increase due to an additional premium known as Marriage Value. Even if your lease drops below 80 years by one day, this premium is still payable to the Freeholder.
Not only this but lenders are reluctant to offer you a mortgage with a short lease (this applies to anyone wanting to purchase the property as well).
Benefits of extending your Lease:
- Having a longer lease (90 years plus) can increase value and saleability
- It is significantly cheaper to extend a lease when it has more than 80 years remaining
- You are more likely to secure a mortgage (as is your buyer)
- It removes any ground rents
Eligibility
The owner does not have to occupy the property but must be the registered owner.
Period of extension:
A successful application for flats adds 90 years to the unexpired term of the lease and for leasehold houses 50 years. Benefits of extending include adding extra value to the property and not having to pay ground rent for the duration of the extended lease.
Our Service
- Full inspection of the property
- Valuation of the property based on it having an extended lease
- Review of the lease to calculate the remaining term and any ground rents payable
- Calculation of lease extension premium
- Valuation report which includes a lower and upper end premium payable
- Recommendation on initial offer to be made
- Any onward negotiations with the Freeholder to arrive at an agreeable premium payable.
Lease Extensions
FAQ
How much will it cost?
The cost depends on many factors including the length of lease and legal costs. It is worth nothing that leaseholder applying under the 1993 Act is liable to pay the landlord’s legal and valuation costs. Leases with 80 years or less unexpired terms incur additional costs as marriage value is payable. Marriage value is the increase in value of a property arising from the grant of a new lease and is included in the calculation of the premium. Before embarking on applying for extension you should have a financial plan in place as costs can increase and the applicant is liable for a freeholder’s reasonable costs.
Why extend a lease?
As a lease gets shorter, the value of the lease decreases and becomes more expensive to extend the lease. It can also be difficult to sell a property with a short lease as many lenders will not grant mortgages on leases of 70 years or less. It is worth seeking professional advice on whether to apply for a lease extension before putting a property up for sale if you have a short unexpired lease term left.
What is the procedure for extending a lease?
A Section 42 notice under the 1993 Act is served on the freeholder outlining intention to extend the lease specifying a date for response within two months of the date of the serving of the notice. If the landlord does not respond within the two months or responds late, the leaseholder can apply to the County Court for a lease extension on terms set out in notice within six months from the date the freeholder is supposed to serve the counter-notice. Correct wording of the notices, dates for response are critical including ensuring that notice is served to the freeholder’s correct address to avoid delays and additional costs to the leaseholder
Do I need to seek professional advice?
Leaseholders should seek professional advice from a chartered surveyor specialising in leasehold valuations and a solicitor.
What happens if agreement on extension cannot be reached?
If a party cannot agree on premium, application can be made to the First-Tier Tribunal (Lands Chamber) for determination. Professional advises working on behalf of both parties would try and negotiate a price first to avoid delays and costs.