If you own a leasehold flat or are planning to purchase one, then special care needs to be given to the number of years left on the lease. In the past, many purchasers and mortgage lenders have been happy to accept leases with as little as 50 to 60 years remaining but in recent years, a more cautious approach has been adopted and it is not uncommon for owners to be forced into considering a lease extension when there are still 90 years (or even more) remaining on the lease.
This may seem very strange given that you are unlikely to still be around when your lease comes to an end but the financial implications of obtaining a lease extension mean that buyers and mortgage lenders are increasingly insisting on leases being extended before they will consider the property acceptable.
The law allows almost all owners of flats (once they have owned the flat for two years) to extend their lease for an additional 90 years on the same terms as their existing one. If your current lease obliges you to pay ground rent, then extending your lease will see your rent abolished. However, you will be required to pay a sum of money as compensation to your landlord for the privilege of obtaining a longer lease.
A leaseholder owning a flat worth £150,000 and paying an annual rent of £25 might expect to pay in the region of £3,000 to their landlord to extend their lease when 85 years remain. When the lease has 75 years remaining, that figure could be in the region of £12,000, which could increase to around £18,000 when there are only 65 years remaining. For this reason, it can often be in the best interests of an owner to extend their lease sooner rather than later.
Owners of flats are required by law to pay their own legal and valuation fees, as well as those of the freeholder. For that reason, the lease extension process can prove to be very expensive.
Some landlords will offer a cheaper lease extension but on the basis that a much higher ground rent becomes payable – perhaps £200 per year or more. High ground rents can have adverse consequences when you come to sell or remortgage your property and therefore caution is urged before agreeing to any such proposal that your landlord might make.
Extending your lease is a very complicated area of law and we often find that many clients benefit from a free, no-obligation conversation with one of our expert solicitors or conveyancers. We would be happy to talk you through the process, the likely timescales and the charges that you might expect to pay both for the work that we do and also for the other parties in the process
If you are interested in using Ryan Property Law to help you with your lease extension, please click on the link below and we will do our best to assist.
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