We recently acted for the owner of a long leasehold property, and we negotiated an extension of his Lease by 90 years on favourable terms to him. You may wish to do the same-we can help you!
Why should you extend your lease?
The value of your flat is affected by the number of years your Lease has left to run. The value of the flat declines as the length of the Lease reduces, and there is a significant reduction when the term remaining falls below 80 years.
As a Lease is always diminishing, it is a “wasting asset” so it’s important to extend your Lease if you can so that your flat will achieve its full market value. If you qualify, you are entitled to ask the Landlord to extend your Lease, under The Leasehold Reform, Housing and Urban Development Act 1993 as amended by the Commonhold and Leasehold Reform Act 2002.
What difference will it make to me?
The effect that extending your Lease has depends on how long it has left to run.
- less than 70 years; the Flat is becoming less marketable, as most mortgage lenders will either not lend against flats with leases of less than this length or will offer less favourable terms.
- between 70 and 80 years; it’s important to take action now, as the cost of extending the lease will increase.
- Over 80 years; taking action now will avoid “marriage value”, under which the Landlord is entitled to 50% of any uplift in value resulting from a lease extension.
The longer you wait, the more expensive it will become. For the reasons explained above, it’s advisable to extend your Lease as soon as you can, if possible.
Extending your Lease also provides you with the opportunity to rectify defective clauses that can cause particular problems with mortgage lenders (for instance insurance provisions, definition of the property and repairing obligations etc.).
How do I Qualify?
If you have owned your flat for 2 years or more, you are entitled under the 1993 Act to ask your Landlord to extend your Lease.
What will it cost?
The main expenses are:
- The premium-the amount you pay to the landlord. This will be determined by valuers acting for you and the landlord.
- Valuation fees. Although you do not need a full valuation, we strongly recommend that you get proper valuation advice so that the premium you propose in your notice can be justified. Surveyors’ fees typically should be about £250 plus VAT.
- Legal fees. Our fees will normally be in the region of £500 plus VAT (£87.50), minor disbursements (say £10) and a Land Registry fee (£40). This is on the assumption that agreement is reached with the Landlord after service of the notice and without having to refer your case to the Leasehold Valuation Tribunal (“LVT”) or a hearing before the LVT. If this is necessary we will give you an estimate of the costs you are likely to face before we take any further action.
- The Landlord’s reasonable legal and valuation fees. These are likely to be about £1,000 plus VAT in total (although we would try to negotiate a reduction of these on your behalf).
What Happens Next?
A formal notice is served on your behalf on the Landlord which says that you wish to exercise your right to extend your Lease, and includes your proposal for the premium. We would then negotiate with the Landlord over the premium payable and also the terms of the extended Lease to be granted. If no agreement can be reached you have the right to refer your case to the Leasehold Valuation Tribunal, who will then make a decision on the evidence before it.
What action do I need to take?
If you are interested in learning more about extending the term of your Lease please contact us and ask to speak with either Ian Torr or Leah McSherry.