Lease Extension Negotiation and Cost

Posted on August 17, 2018 by dev@perryhill

Residential Lease Extension – Why You Should Extend Your Lease

Property and land registry law can often be extremely complex. If you are considering purchasing a property or already own your property, you may wish to know more about Residential Leasehold Extensions.

A Leasehold Agreement means that you own your property but the land on which your property has been built is owned by the Freeholder. This may not seem ideal, however, as long as the Lease remains valid, then you are entitled to occupy the property.

Often people may purchase a house or flat without realising that the number of years left on the Leasehold is not enough. Though not always a problem at the time, it could cause issues if you needed to suddenly sell the property.

In fact, approximately 60% of mortgage lenders won’t lend on properties with less than 75 years left on the Lease.

This is why considering a Leasehold Extension is an ideal solution for people finding themselves heading towards the end of their Lease.

Lease Extension Advice – How to Negotiate a Lease Extension

At Perry Hill, our expert residential property valuers provide concrete advice to secure the future of not just your bricks & mortar but your home and investments.

Negotiating a Leasehold Extension can sometimes be a difficult process, requiring the professional assistance of property consultants who are able to confidently negotiate Leasehold Extensions.

Our Lease Extension specialists begin the process by providing an up-to-date valuation report of the property, including detailed property surveys and inspections. This provides the foundations from which to begin negotiating the extension of the Leasehold with the Freeholder.

Perry Hill Leasehold negotiation services ensure that the Leasehold Extension is fair and representative of the current market and property valuation.

Extending My Leasehold – When is the Best Time?

Though it may seem like your Leasehold has an adequate number of years left, properties with a residential Lease of 79 years or less can often cause homeowners and their family’s issues in the future.

For example, if family members inherit a property with a 70-year Leasehold, they may struggle to sell the home and be unable to afford the upkeep of the property.

Each residential Leasehold Extension in the UK can vary in price, though extending Leaseholds can be considerably less expensive if approached before the Lease reaches the 79-year expiration mark.

The Cost of Residential Lease Extensions – Are Lease Extensions Worth It?

It’s important to cost-up the potential impact of purchasing a property with a Leasehold of 80 years or less. Financially, you may be able to afford the property with a mortgage but in several years’ time, your circumstances may not allow for a Lease Extension.

Extensions on properties with short Leases (65 years or less) are expensive. In fact, it’s these residential Lease Extensions which can often become extremely complex, making it worthwhile to instruct a professional Leasehold Extension negotiation company to assist you in securing the best price possible for extending your Leasehold. The reason these types of Leaseholds are much more expensive is because below 80 years, your Leasehold extension costs include a 50% ‘marriage value’ fee.

‘Marriage value’ refers to the extra value extending your Leasehold adds to your property.

Can I Extend my Residential Leasehold?

Most of the time houses are sold as Freehold and so it is flat owners that may require residential Leasehold Extension services. Increasingly however, new build houses are being sold with Leasehold agreements leaving residents angry at unexpected rental charges in addition to expensive mortgage payments.

Though most homeowners are able to extend their residential Lease, there are certain legal criteria to be met before doing so.

Most importantly, you must have owned the home for a minimum of 2 years. This can cause additional expenses if the two years you are required to wait means that the unexpired years on the Lease drops below 80.

Professional Leasehold Extensions from Perry Hill

The decision to extend your residential Leasehold is an important one for the future of your home and family. It is recommended to undertake residential Leasehold Extensions with the assistance of qualified professionals to ensure the outcome of the Leasehold Extension Agreement is favourable and fair for both the Leaseholder and the Freeholder.

Perry Hill Chartered Surveyors successfully help homeowners each year in extending their residential Leaseholds. Our industry-recognised surveyors save our Clients time and money by helping with the burden of negotiating complex residential Leasehold negotiations.

Find out more about Lease Extensions and contact a member of our team today to discuss your options.

A guide to Leasehold extensions

Posted on July 2, 2018 by dev@perryhill

Lease approaching an 80-year unexpired term?

Extending your lease on a leasehold property may seem like an unnecessary expense, or something that you can simply put off, but by leaving your lease renewal you could end up paying much more. Renewing your lease gets more expensive every year you leave it, and while this may just be a matter of a few hundred pounds at first, once you drop below 80 years, you could see a substantial increase. For example, a flat with 81 years left on the lease may cost around 20% more if you leave your renewal until you only have 79 years left on your lease.

Letting your lease run below 80 years could also a have negative impact on your mortgage options. Lenders now have much stricter criteria when it comes to properties with short leases, and in some case may alter their interest rates depending on the number of years you have remaining on your lease.

If your leasehold is approaching the 80-year deadline, it’s best to look at extending your lease as soon as possible. A specialist valuer report to determine the likely cost of the premium will cost you from £725 plus VAT, however, as the leaseholder, you will also be liable for the landlord’s “reasonable” legal and valuation costs as well.

The dangers of informal lease extensions

Accepting a non-statutory or informal lease extension from your Freeholder may look like a bargain but in reality it is just a way for an unscrupulous Landlord or Freeholder to dupe you out of as much money as possible.

Once you have owned your flat for a period of two or more years, you are legally entitled to extend your lease by up to 90 years and reduce your ground rent to zero. However, you are also legally obliged to compensate the Freeholder in three different ways:

Ground rent – The total amount of ground rent you owe to your Freeholder for the years remaining on your lease, calculated in today’s money
Reversion – The amount you would have to pay your Freeholder for the remaining years of your lease, paid as a lump sum with an equivalent compound interest rate of 5%, for example
Marriage value – Only applicable if you extend your lease after it has fallen below 80 years, and is calculated on the increase in value the property will see now the lease has been renewed.

Once you have made these payments, your statutory legal rights permit you to renew your lease and extend it to 165 years, you will also no longer have any ground rent to pay. In addition, it will be another 85 years before the lease needs extending again, at which point it will be very cheap since ground rent won’t be included in the calculation.

While most Freeholders are honest people, there are, of course, those who want to make as much as possible from renewing a leasehold. This can be done by offering an informal renewal, which at first glance can look very appealing, but in the long run will guarantee large profits for the unscrupulous Freeholder and very little legal standing for you to do anything about it. Since it is in their best interest for you to agree to an informal renewal, some Landlords may try to pressure you into accepting one by misquoting the law. This is not the case, and your statutory rights guarantee you a formal renew, so make sure that is what you get.

A section 42 notice, your legal right to extend your leasehold

Before serving a section 42 notice to your Freeholder, you will need to have a surveyor conduct a valuation of your property. Your solicitor then contacts your Freeholder to communicate the premium that you are willing to pay to extend your lease.

Your Section 42 notice should be served in person to avoid any dispute over confirmation of receipt. Once received your Freeholder has two months to issue a Counter Notice to either accept or reject your claim, and if necessary state the lowest figure they will accept. There then follows a further two-month period for your surveyor and your Freeholder’s surveyor to discuss, negotiate and conclude the premium to be paid.

Serving a Section 42 notice allows you fix the valuation date, as well as to make application to tribunal, if your Freeholder is being unreasonable.

Leasehold extension advice in Surrey and Guildford

At Perry Hill Chartered Surveys, we have extensive experience dealing with lease extension and have acted for both Freeholders and Leaseholders, acquiring the most equitable deals. For any advice or guidance on lease extension process, please contact us on 01483 237333 or contact us here.

You can also read more information on negotiating lease extensions and the cost here.

Commercial Real Estate Basics

Posted on June 5, 2018 by dev@perryhill

During this article we explore the benefits of investing in commercial property and run through a basic check list that every buyer should follow.

As a result of the raised stamp duty rates and the less favourable tax relief available on mortgage repayments, the housing market saw a record low of the amount of houses for sale. Investors are now considering investing in commercial property for the first time rather than residential property.

Commercial properties include:

retail buildings
office buildings
warehouses
industrial buildings
ground rent investments
a mix of the above

There are many myths about buying commercial property such as it is too expensive for the average buyer, it is too risky and you need to be an expert to buy commercial industry property. Perry Hill Surveyors can help you through this. In some cases, these may be deceptive. There are many advantages to buying commercial property – we explore the pros and opportunities associated with commercial real estate investment below.

Why buy commercial real estate, what are the opportunities and what return will I get?

Property is always generally an attractive investment opportunity though commercial properties typically offer more of a financial reward than residential properties. You can usually invest directly by buying a fund which holds actual physical property in its portfolio or by buying a property yourself. Or, you can invest indirectly by investing in property companies, developers and house builders, or in funds invested in those companies. There are many advantages to investing in commercial property over residential property which we outline below.

Income: The best reason to invest in commercial over residential rentals is the earning potential. Commercial properties generally have an annual return off the purchase price between 6% and 12%, depending on the area, which is a much higher range than typically exists for single family home properties (1% to 4%).

Professional tenants: Business owners will have more of a professional relationship with you as a tenant in comparison to a residential tenant. There will generally be more of a business-to-business customer relationship which will ensure the interactions are of good manner and conversions will be more efficient. Communication like this removes many possible problems that could come with an unprofessional residential tenant.

Building Repairs & Maintenance: Commercial tenants will be more inclined to keep the property well cared for and of good quality as it is a representation of their business. This helps you maintain and improve the quality of the property without needing to cover costs of damages from carelessness.

No late night calls: As these properties will likely be empty at night there is minimal chance of receiving a panic call in the middle of the night about a lost key. You only need to work when the business owners and employees are at work which is usually during normal day time business hours. Should a break in or a fire alarm happen in the middle of the night, you would usually have an alarm monitoring service that notifies the proper authorities as well.

Limited expenses: The lessee takes care of property expenses directly as well as real estate taxes, such as business rates, service connections such as gas, water, electric and drainage, repairs, and tenants improvements.

Income stream: It is common that a commercial property is purchased with the occupational tenant and lease already in place so there is no delay before receiving income. Rent is usually paid months in advance as well so income stream and cash flow is positively impacted.

Buying commercial real estate checklist

Buying commercial property for the first time can be a daunting time. Understanding the basic knowledge and having a check list in place will give you some peace of mind. See our checklist on buying commercial real estate:

Explore the commercial property market and come up with a realistic budget.
Location is key and you may want to look right in the city centre or just outside the inner city. Find a location that will attract the tenants you are looking for.
Check local laws such as noise restrictions in the area you are looking at, make sure you are fully aware of all the restrictions you will need to adhere to in the area.
Thoroughly check the condition of the building as you could be faced with high repair and maintenance costs if you have not carried out the proper checks.
Make sure this is what tenants are looking for rather than just what you are looking for.
Bring in a commercial real estate agent that will be able to help you make a more informed decision. See our services and how we can help you.

Perry Hill Commercial Property Services

Our team has overseen more than £200 million worth of sales and purchases since 2003. We successfully handle commercial property sales and lettings for all property types including office, retail, industrial, warehousing, leisure, mixed use and development land.

Our clients include private wealth, trusts, estates, business occupiers, receivers, lenders, investors and developers. We pride ourselves on our ability to close transactions at full market value, quickly.

Our property management services cover an array of disciplines, supported by our extensive knowledge and experience of the local property market. Here at Perry Hill, we ensure our property management services are thoroughly planned in order to effectively build strong Landlord and Tenant relationships.

Find out more about our services and how we can help you.