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The right to a longer lease - Lease Extension

Why can there be a problem with a long leasehold property?

Flat ownership in England and Wales is a very popular form of owner-occupation, especially with all the maintenance and building insurance taken care-of. Most flats are owned on a leasehold tenure and there can be problems due the nature of leasehold, particularly a 'short' lease.

What is a short lease?

All long leases are granted for a fixed term of years (commonly 99 or 125 years) from a specific date, usually with the payment of a small annual 'ground rent'. At the outset, a 99-year lease is regarded as being the same value as a freehold. Obviously, it will grow shorter as the years pass, hence a lease is known as a 'wasting asset'. However, this means it will also gradually lose value. Buyers and mortgage lenders know this. Flats with around 85-years or less to run should be long enough for most of us, but they are increasingly regarded by buyers and their legal advisors as 'short'. Mortgage lenders often refuse to lend on leases with less than 75-years left. Additionally, the ground rents are often set to increase periodically, sometimes to high levels.

The Lease Extension Solution:-

Since 1993, flat leaseholders have a legal right to a 90-year Individual Lease Extension and to abolish the ground rent. Qualification includes ownership for at least 2-years.

An extension can be achieved by any individual leaseholders independent of any others in the building.

The leaseholder pays a premium to compensate the freeholder, and pays the freeholder's reasonable legal and valuation costs.

A group of leaseholders in the same building can act together to claim extensions in order to achieve a saving on the fees/costs. This sometimes happens where there are insufficient numbers to achieve a Collective Freehold Enfranchisement.

Benefits of a Lease Extension include:
Restore saleability
Increase Value
Long lease acceptable to buyers and mortgage lenders
Abolish Ground Rent

NOTE: If the lease has more than 80 years to run the premium is lower because 'marriage value' is not payable.

How much should you offer your Landlord?
Howard Gross can provide detailed qualification and valuation advice for Lease Extensions based on many years experience phone for a fee quote on 01202 716611.