Why extend your residential lease sooner rather than later?

If you own a leasehold flat, when was the last time you thought about the length of your lease? Many leaseholders don’t think twice about their lease until they come to sell the property – at which point, they may find that a short lease makes it harder to sell or achieve the price they want. The solution is to extend the lease sooner, rather than wait until you’re trying to sell.

Six reasons to be proactive and extend your lease now

  1. When the time comes to sell, if you’ve already extended the lease, you’ll be ready to put the property on the market straight away. No fuss, no waiting.
  2. A flat with a longer lease – the longer the better – is much easier to sell. Buyers don’t want the hassle of having to extend the lease themselves within a few years of buying the place. Most will simply look elsewhere and choose a property with an extended lease.
  3. The majority of high street mortgage lenders won’t lend on a property that has an unexpired lease of 75 years or less. So if you’re thinking of re-mortgaging or looking ahead to a future sale, a short lease may limit your options.
  4. Properties with leases of less than 80 years depreciate faster than longer-lease properties. Extending now is a smart way to protect your investment.
  5. If you’ve owned the leasehold for two years or more, and meet other qualifying criteria, you may be able to extend your lease for an additional 90 years, on top of the remaining lease term. So if your lease has 80 years left, and you extend for an additional 90 years, that’s a new lease of 170 years – making your property more valuable and easier to sell in the future.
  6. Finally, it’s far cheaper to extend a residential lease at 81 years or above. If you wait until the lease drops below that, it’ll cost you more. Is it worth putting it off and paying more in the long run?

When you work with a residential expert, extending your lease isn’t as complicated as you might think. At Perry Hill Chartered Surveyors, we’ve helped many homeowners across Guildford, Surrey and London successfully extend their leases – and have fine-tuned the process to be as quick, painless and affordable as possible. Talk to us today about extending your residential lease.

Lease Extension – How to Extend your Lease

Two routes are available for homeowners interested in obtaining a lease extension premium. This is an informal lease extension or a statutory lease extension. In this blog I will address the typical process for statutory lease extension.

Under all leases, the lessee will be responsible not only for your own surveying and legal expenses in extending the lease, but also your freeholders costs as well.

Statutory Lease Extensions Explained

This is the right under statute for a statutory lease extension, which a 90 year extension to your original remaining term at nil ground rent provided that you are a qualifying lessee. To be a qualifying Lessee you have to meet the following criteria:

  • Leasehold Ownership. You have to have owned the leasehold interest for at least 2 years
  • Leasehold term. A long lease is, mainly, a lease for a term of years in excess of 21 years from when it was originally granted (this does not apply to the reaming unexpired term, but the original lease length).

Despite fulfilling the criteria, you would not be eligible for a statutory lease extension if:

  • Housing Trusts. If the landlord is a charitable housing trust and the flat is provided as part of the charity’s functions.
  • Commercial Interests. It is a business or commercial lease.

If these criteria are fulfilled, then the route of a statutory lease extension is available for you.

Leasehold Renewal Process

A typical lease extension process would involve the following:

  • Instruct a surveyor to carry out a lease extension valuation on your property, this will normally set out a fair and reasonable premium for a lease extension.
  • It will also set out the level in which a section 42 notice should be served upon the landlord. This is a notice that sets out under statute that you are seeking a lease extension valuation. It also sets the valuation date as the date of the notice. This is very important, as more times elapses, the less the unexpired term thus resulting in a more expensive premium.
  • The notice cannot be served by the surveyor; however it must be served by a competent solicitor.
  • The landlord has a 2 month period to serve a counter notice, section 45 notice, this will either accept the proposed premium or reject the premium in the section 42 notice and state what they believe the premium should be with the lease extension.
  • Lease extension’s have a degree of negotiation, as there are a number of variable factors and the lessee is typically looking to acquire the premium for the lowest figure, while the freeholder is seeking the highest possible figure.
  • Typically once both notices have been served, each of the surveyors on both sides are instructed by their clients to negotiate the lease extension premium, looking to get the best deal for their party using the facts, the negotiation fees are payable by each of the parties. Unlike the valuations fees which are payable by the Lessee.
  • Once the premium is agreed, which typically can be a 4-6 month period, the matter is passed onto the solicitors who will agree the new lease and with the transfer of funds the matter can be completed.
  • If the premium is not agreed, in the allotted time period, the lessee can make an application to tribunal; this typically has an associated fee of £500+Vat through the solicitors.
  • Each party will have to bear their own costs with professional fees and share the tribunal costs equally.
  • The tribunal will consider the case bought forward by each of the surveyors and decided on the premium payable. This can be appealed; however this is a costly exercise.

Residential Lease Extensions in Guildford, Surrey and London

Perry Hill’s residential experts successfully help those looking to extend their residential lease. Our team can provide expert valuation services prior to the lease extension process. We are also happy to assist you in the negotiation stages of the lease extension process. To find out more about our residential lease extension team, get in touch here or call us on 01483 237333.

Lease Extension Negotiation and Cost

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

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:

  1. 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
  2. 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
  3. 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.

Contact Us

Contact Us

Please get in touch using the form below