Lease Extensions

If you own a leasehold residential property where the lease has less than 85 years to run, you should give serious consideration as to whether to extend the lease. This may seem strange considering that you are probably not going to be around when the lease expires but if you do not act, you could find that the value of your property is reduced considerably.

The reason for this is that most mortgage lenders require a lengthy amount of time remaining on any leasehold property before they will consider providing a mortgage on it. Even if you don't need a mortgage, you should bear in mind that it is likely that someone wanting to buy your property in the future might well do, so if they can't get a mortgage, then the value of your property could suffer.

Since the ‘credit crunch', many lenders have increased the required minimum lease length that they are prepared to accept – for instance, Halifax (one of the largest lenders) requires there to be at least 70 years left on the term.

The law allows almost all owners of flats (once they have owned the flat for two years) to extend their lease on the same terms as their existing one. If you currently pay ground rent, extending your lease will see your rent abolished. However, the compensation you will pay to your landlord will get higher the longer you leave it.

As an illustration, a flat worth around £150,000 with a rent of £50 per year should cost you around £2,000 to £4,000 in compensation to extend if there are 85 years remaining of the term. However, if there are only 75 years remaining, the compensation costs rise to in the region of £8,000 and with 65 years remaining, this increases to around £14,000. Because of the escalating costs, buyers increasingly avoid purchasing shorter-term leases.

We can advise you from start to finish in negotiating with your landlord over the price and dealing with the lease extension, including obtaining the consent of your mortgage lender. If you are interested or require further information, please feel free to call us on 0113 236 2334 to discuss your needs.