Why Should I Extend My Flat’s Lease As There Are More Than Enough Years Left For The Time I Am Likely To Live There?
If you are a Leaseholder you should review how many years remain on your Lease. If a Lease drops to too short a term it will reduce its value and may cause problems in re-mortgaging and selling the Lease. The Lease of any flat gets shorter every year. Generally speaking, if your Lease is for less than 90 years you should consider extending it. You have a right to extend the term of your Lease if you cannot come to an agreement with your Landlord. You can formally serve a Notice of Claim to which your Landlord has to respond. The lower the number of years left on the Lease the less valuable it will be, especially if Leases have less than 80 years remaining, and the more costly it will be to extend.
WHY SHOULD I EXTEND THE TERM OF MY LEASE ?
- Shorter Leases are more difficult to re-mortgage; mortgage companies consider the security for their loan to be less protective.
- Properties with short Leases can be more difficult to sell .
- The cost of extending Leases gets more expensive the shorter the Lease . This is particularly the case if there are 80 years or less left on the term of the Lease because the formula for calculating the premium adds an additional element of “marriage value “. This increases the premium which must be paid to the Landlord .
- Whilst many Leases can be extended by Agreement with the Landlord , Leaseholders have a right to extend their Lease by adding 90 years to the remaining term of their Lease and reducing the Ground Rent to nil . The right to extend your Lease has a simple qualification, that is the Leaseholder must have owned the Property for two years, but does not have to reside there.
- The Law also has a formula by which the premium paid to the Landlord is calculated. If necessary the premium can be determined by an independent tribunal, although tribunal hearings are not normally required.
- If you want to extend the terms of your Lease then the earlier you do so the less expensive it will be and, because it is a statutory right, the Freeholder is not entitled to insist on an excessive premium to extend the Lease. Jeremy Teall , Partner of Prince Evans advises “many Leaseholders delay extending their Lease because they do not consider it is an issue as a current Lease is longer than any time they expect to own the flat. They do not realise that they are entitled to do so, until they try to re-mortgage or sell their flat when the cost of the premium is greater than it might otherwise have been. Extending the lease is not always a priority on the “to do” list and can sometimes not be properly considered with the diversions of “everyday life”.
- In addition, purchasers of flats with short Leases can still obtain the benefits of a Lease Extension without having owned it for two years. This requires provisions within the contract of sale for the service of the Notice of Claim by the seller immediately before the sale is completed . The sellers and their agents are not always aware of this possibility but it does enable a property with a short Lease to be extended by the buyer, without the buyer having to wait two years.
- A crucial element of the Lease extension procedure is having the correct advice on the value of the property and the premium to be paid under the statutory formula . We currently work with a number of Lease extension valuation specialist surveyors who we can recommend.
If you require any further information please contact Jeremy Teall, Partner and Head of Landlord and Tenant on 0208 567 3477 or by e-mail to Jeremy.firstname.lastname@example.org and he will discuss matters further with you .