What are the benefits of extending my lease?
There are several benefits to using the formal route to extend the lease on your flat including:
You can extend your lease for an additional 90 years on top of your unexpired term, meaning that your flat is easier to sell and get a mortgage;
Your ground rent is reduced to nil (referred to as a peppercorn rent) from completion of the lease extension;
A lease is a wasting asset, which means that the shorter the term becomes the less it is worth so a longer term inevitably increases the value of the flat;
Extending your lease will increase the value of your property if you wish to sell, a longer term is more appealing to potential buyers;
Lenders are becoming more conservative on lending against flats which have short leases. Most lenders will refuse to lend where a lease drops below 55 – 60 years. This means that you may have difficulty re-mortgaging yourself. And equally, if you come to sell the flat, then any prospective buyer may be unable to obtain a mortgage over the flat. That means that your flat may become unsaleable.
NB there is an alternative to this formal method of extending your lease.
Click here to read about informal lease extensions
Considering extending your lease ? Need Specialist Solicitors? Call us on FREEPHONE 0800 1404544 for FREE Initial Phone Advice.
When should I extend my lease?
The short answer is sooner rather than later.
At present there may seem to urgent need for a lease extension, and there are costs involved.
However, in almost all circumstances, once the term of your lease has dropped below say around 85 or so years, it’s best to consider a lease extension.
There are four key reasons why this is the case.
1. Rising premiums
As the clock ticks onwards and your lease term starts to drop, the price which you have to pay to the freeholder to extend the lease rises
2. Rising premium due to the property market
At a time when property prices are on the up, or even at a time when the property market is neither rising nor falling, you should really be thinking about extending your lease.
This is because one of the key factors which affects the price you will have to pay the freeholder to extend your lease is the market value of your flat. As the value of your flat starts to go up, so does the price you will have to pay to extend your lease. So get in quickly before the price rises too far. If you don’t the rising value of your flat – which is usually seen as a positive from an owner’s point of view – will mean that you will have to pay more to extend the lease of your flat because of its increased value.
3. The 80 Year Rule and Marriage Value
If your lease is getting close to having just 80 years left, then you need to take particular care.
Why? Because on the very day your lease drops under 80 years, your freeholder is allowed to charge an extra fee called the Marriage Value. For the leaseholder, this usually means an increase of often several thousands of pounds or more to extend their lease. So if you are even a few years away from that critical 80 year stage, get the process going now.
You should be especially careful if you’re negotiating a voluntary or informal lease extension with your freeholder rather than going down the legal route.
There are sadly some unscrupulous landlords out there who will play along with the idea of an informal leasehold extension until the lease gets to the 80 year point – and on that very day they withdraw from the voluntary process meaning you have no option but to follow the legal route and pay out for the increased premium due to the marriage value
4. Leasehold Extension when Selling Your Property
Lots of sellers only realise that selling a property with a short lease is difficult when they get round to putting it on the market. That situation can cause serious problems, so the best plan is to get the lease extension sorted out well before you start thinking about selling the flat.
Want to know more about the lease extension process?
Click here to read about how to extend a lease
Costs Associated With Delay
A few years back, a London based company specialising in funding lease extensions estimated that every year of delay in extending a lease raises the cost of extending that lease by 12%. You don’t need a degree in Maths to work out that at a time when prices are rapidly rising, the cost of getting a leasehold extension could double in less than seven years.
How much will it cost to extend my lease? Click here to find out
What happens when my existing lease runs out – can I still extend it?
No – it’s too late then. At this point the freeholder is under no legal obligation to extend your lease as the lease has expired. This means that you have no lease to extend or sell. The interest in the flat then reverts back to the freeholder.
Looking for solicitors who who can help you extend your lease? Call our team now
If your lease is getting dangerously close to the 80 year stage, or worse still it’s looking likely to run out entirely, you should seek legal advice as soon as is possible.
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