Important Facts About Lease Extensions
Extending a lease is not necessarily as complicated as it sounds. But it does help if you are wise before the event so you can avoid any unnecessary pitfalls.
An Introduction to Lease Extensions
Residential Flat owners have had the right to seek lease extensions for quite some time now. Although the whole arena of lease extensions used to be quite complicated, thankfully due to some recent legislation, it is now a much simpler task to extend a lease.
Although house owners also have the right to extend their lease, the majority of lease extension requests are from flat tenants as householders will be more inclined to purchase the freehold than just extending their lease on the property.
Obviously, there are specific legal requirements to be met before a lease extension can go ahead. There are also a number of exceptions and special circumstances to these too. However, here are the principle requirements:
The leaseholder must have leased the flat under a long lease which means for a term over 21 years. The leaseholder needs to have been in possession of the lease for a minimum of 2 years.
Previously, it used to be a requirement for the leaseholder to be a tenant in the property, but that is no longer required.
Although house owners also have the right to extend their lease, the majority of lease extension requests are from flat tenants as householders will be more inclined to purchase the freehold than just extending their lease on the property.
Obviously, there are specific legal requirements to be met before a lease extension can go ahead. There are also a number of exceptions and special circumstances to these too. However, here are the principle requirements:
The leaseholder must have leased the flat under a long lease which means for a term over 21 years. The leaseholder needs to have been in possession of the lease for a minimum of 2 years.
Previously, it used to be a requirement for the leaseholder to be a tenant in the property, but that is no longer required.
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- What the wiki says about leasing
- Provides more information about leasing in general which can be very useful as a foundation.
When to Apply for Lease Extensions
The calculations used to value lease extensions are not simple. There are several factors that are taken into account, and particularly they are the length of the unexpired lease and the ground rent or yield. On this there is another aspect that can be very important and actually make you think whether you should go ahead or not. That is if your leased term has under 80 years left on it at the time of serving your lease extension notice on your landlord, then a marriage value will need to be paid to the landlord. This can make lease extensions significantly more costly.
For this reason you would be wise to apply to extend the lease sooner than later as any delay will greatly affect the final cost of the lease extension.
Another reason why you should act sooner rather than later to extend your lease is that if your lease has less than 60 years left to run on it, it would prove more difficult to sell because most mortgage companies would insist on a leasehold property having at least 60 years left to run. Of course a cash buyer would not have that concern, but you cannot rely on many of them.
Successfully completed lease extensions add on another 90 years to the lease which means that you will get 90 years on top of whatever was left to run on the lease.
If you are living in a flat that is part of a property containing many flats, then you may find that lease enfranchisement would be a better avenue to explore rather than a lease extension. In this instance you are effectively purchasing the lease as a group of leaseholders. Naturally, the economics will need to be looked at closely to decide which would be the most suitable route to take.
As the valuation of the property is a very important part of the whole endeavour, and can lead to some serious problems if not performed correctly. It would be very sensible to enlist the services of as surveyor who specialises in lease extensions. You will need to have some idea of what to pay for the lease extension and you will also need to set a price in the Initial Notice that will be sent to the freeholder. If that price is not a realistic one, then the Notice you serve can be declared as invalid.
More details here
For this reason you would be wise to apply to extend the lease sooner than later as any delay will greatly affect the final cost of the lease extension.
Another reason why you should act sooner rather than later to extend your lease is that if your lease has less than 60 years left to run on it, it would prove more difficult to sell because most mortgage companies would insist on a leasehold property having at least 60 years left to run. Of course a cash buyer would not have that concern, but you cannot rely on many of them.
Successfully completed lease extensions add on another 90 years to the lease which means that you will get 90 years on top of whatever was left to run on the lease.
If you are living in a flat that is part of a property containing many flats, then you may find that lease enfranchisement would be a better avenue to explore rather than a lease extension. In this instance you are effectively purchasing the lease as a group of leaseholders. Naturally, the economics will need to be looked at closely to decide which would be the most suitable route to take.
As the valuation of the property is a very important part of the whole endeavour, and can lead to some serious problems if not performed correctly. It would be very sensible to enlist the services of as surveyor who specialises in lease extensions. You will need to have some idea of what to pay for the lease extension and you will also need to set a price in the Initial Notice that will be sent to the freeholder. If that price is not a realistic one, then the Notice you serve can be declared as invalid.
More details here
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