Why do I need to think about extending my Lease?
- AuthorRebecca West
If you own a flat, the likelihood is that you own a lease rather than owning the property outright. A lease is a right to use the property for a set number of years. Once those years have elapsed the lease comes to an end and the property reverts to the landlord.
When the property is first sold the lease term will be fairly lengthy, commonly 125 or 99 years, but as time passes the term gets shorter. As the term gets shorter, the value of the lease decreases and therefore so does the value of your property.
A short lease can make a property harder to sell or mortgage. If you are selling your property, any potential purchasers will take into consideration the lease term. Many mortgage lenders will also not lend on a shorter lease, typically below 80 years. Therefore, if you are selling your property and the lease needs renewing, this could reduce the number and type of potential purchasers. A purchaser may also ask you to extend the lease prior to proceeding, which will inevitably delay the sale process.
The shorter the term of the lease left the more expensive it will be to extend the lease. It is important to note that the cost of extending your lease will be considerably more expensive if the years left on the lease drop to below 80. This is because you then have to pay what is known as marriage value to the landlord. It is therefore particularly important to look into extending your lease term if it is nearing this point and advisable to do it well before this. The premium payable to the landlord for granting a new lease term is a complex calculation based on ground rents, yields and length of unexpired term and should be dealt with by an experienced surveyor. A surveyor will also often negotiate the premium on your behalf if this cannot be agreed. In addition to the cost of the premium you will usually be required to cover the landlord’s legal and surveyor’s fees.
The good news is that you do have the right to extend your lease and this can often be agreed with your landlord on a voluntary basis. However, if your landlord is unwilling, you can force him to grant you a lease extension by following the statutory route. Provided you satisfy the criteria; that you have owned the flat on a long lease for at least two years, you will be entitled to a new lease with an additional 90 years added to the unexpired term with ground rent reduced to nil (‘a peppercorn’).
We can assist you if you have already agreed a premium with your landlord or if you need to follow the formal process. If you wish to apply for a statutory lease extension it is important that the paperwork is completed correctly and the timescales adhered to, otherwise your claim can be rejected. Once the premium is agreed and lease documentation completed the new term will be registered at the Land Registry.
If you are interested in extending your lease, please contact Rebecca West.