What is in this article?
- Understanding your Lease Extension
- Why do I need to extend my Lease?
- What is “Marriage Value” and how could it effect your lease extension?
- Is it worth trying to buy the Freehold instead?
- How much would it cost to extend my lease?
- Effects of not extending your lease
- What happens if my Leasehold Extension goes to a Tribunal
- Where do Allied Surveyors carry out Lease Extensions?
Extending your lease can be a long and complicated process, that if you are not careful, can end up costing you more than is necessary.
Allied Surveyors are experts at providing experienced impartial advice throughout every step of your lease extension.
We can provide an initial assessment and report to enable you or your legal adviser to serve notice. We can also help you negotiate an amicable settlement or, if necessary, represent you at a Tribunal if a settlement cannot be reached.
If you are considering buying the Freehold for your property as an alternative to extending your lease, alone or with others (collective enfranchisement), we can also help so why not contact us for some initial advice and a fee quotation.
The need to extend your lease arises because as the time remaining on your lease gets shorter, the value of your property will diminish compared to a similar property that has a lease of over 100 years.
This reduction may not be very noticable in the early years, but once a property has less than 80 years remaining on its lease it starts to effect the relative value of the property and its ability to be mortgaged.
By extending your lease you remove this reduction in relative value and your property will become more marketable.
So the effect of not extending your lese are:
- The property will become relatively less valuable.
- The property will become more difficult to sell.
- The cost of purchasing the lease extension will continue to increase.
Under the 1993 Leasehold Reform Act, the landlord is entitled to half of the increase in the value of the property when a property with less than 80 years Lease is extended. This is called the “Marriage Value”.
So if extending you Lease adds £5,000 to the value of your property, you will have to pay an additional charge of £2,500 to extend your Lease, in addition to the cost of the longer Lease.
This additional charge can be avoided by taking action before your Lease has less than 80 years remaining.
For houses it is normally far more beneficial to purchase the Freehold than to extend the Lease.
Flat owners are often legally entitled to buy their Freehold with their neighbouring flat owners and take over the building's management.
When you collectively own the Freehold you can usually extend the lease to 999 years for free. The only cost would be the legal fees.
The cost of a lease extension normally depends on these major factors:
- The value of the property.
- The number of years left on the lease.
- The annual ground rent.
- The value of property improvements.
- Additional external factors such as Court Decisions.
Unfortunatly the cost of extending your Lease is as subjective as defining the value of a property. This makes knowing the right amount to offer difficult to calculate.
We can help you to determine how much it will cost you to purchase your Freehold and help you negotiate with the Freeholder.
- 100+ Years remaining – At this stage there is no issues with the lease and you should have no problem selling or mortgaging your property.
- 90 Years remaining – There is still no major issues at this stage with the lease and you should have no problem selling or mortgaging your property. - But you should start to consider extending your Lease NOW.
- Below 80 Years remaining – This is the stage where the real problems start, it is now effecting the market value of your property and “Marriage Value” has to be taken into consideration.
The cost of your lease extension will now cost you more for every year you delay.
- 70 Years remaining – Your property has now become more difficult to mortgage as some lenders may not give loans on properties with short leases.
The cost of extending the lease is now significant enough to deter potential purchasers and/or cause a drop in value.
- 60 Years remaining – Your property has now become very difficult to mortgage. The market value of your property will now be significantly less than that of similar properties with longer leases.
- 50 Years remaining – You are now unlikely to be able sell your propery as most mortgage lenders will not consider lending with such a short lease remaining.
At this stage you will be limited to cash buyers and property investors only. By now as much as 20% could have been wiped off the true market value of your property.
- Below 50 Years remaining – Your propery will continue to lose market value until the lease expires.
- 0 Years remaining – Your propery has effectively become worthless, you no longer own it, it has become the property of the landlord.
In the unlikely event that you cannot come to an amicable settlement with your landlord your case will need to go to a Leasehold Extension Tribunal.
In this Tribunal, an independent and impartial decision will be made after they hear both sides of the case. While they try to avoid the formality normally associated with a court, it is advisable to have your solicitor and surveyor present at the hearing.
Allied Surveyors can represent you at your Tribunal and help you negotiate your settlement.
Allied Surveyors carry out Lease Extensions nationwide.
Our office specialises in the greater West Midlands area including; Birmingham, Coventry, Staffordshire and Redditch. We also cover Shropshire, Central Wales and the Welsh Border.
- Find out more about The areas we cover.