Lease extensions can add significant value to a residential property. Residential properties with short leases can be more challenging to sell – so a lease extension is definitely worth looking into, especially if your lease has fewer than 80 years remaining.
As RICS Registered Valuers and Chartered Surveyors, our team is passionate about providing a professional property valuation service to give you the information you need to pursue a lease extension on your residential property.
Our expert lease extension team in Surrey and London assist with property valuation and negotiating a lease extension or enfranchisement. Our lease extension valuation team also serve Sussex and Hampshire.
- A short Lease is hard to sell.
- Approximately 60% of mortgage lenders won’t lend on properties with Leases that have an unexpired term of 75 years or less.
- A short Lease has a reduced capital value.
- A long Lease flat, with an extended term is easier to sell on the open market.
- Flats and houses with Leases of less than 80 years suffer faster depreciation.
- Simply, it is considerably cheaper to extend a residential long Lease at 81 years or above, than it is at 79 years or under.
- Qualifying tenants have the right to extend their Leases for an additional term of 90 years, (in addition to the unexpired term). i.e., 75 years unexpired + 90 Years = New Term 165 years
- It is possible to assign the benefit of the “Lease Extension Process” via a Leaseholders Right to Assign.
Our service includes a property inspection, measured survey, review of leases and the provision of a valuation report detailing the likely premium for a lease extension.
We also provide valuations for singular or collective enfranchisement, whereby lessees acquire the freehold interest in the building to which their long lease is presently vested. We have extensive valuation experience in assessing leasehold/freehold assets pursuant to both Section 5 and Section 13.
If you own a leasehold property, it is important to consider how many years are remaining on your lease so that you are not left with a leasehold interest of fewer than 80 years.
Leasehold properties with a short unexpired term will have a lower Market Value, as a result of the reduced lease term. Lenders are wary of issuing mortgages on short lease property.
Our ALEP registered and approved valuers help clients to understand the value of their short lease property and the likely cost of lease extension premiums to extend leases.
Our valuers are specialists in appraising Leases and Leasehold premises, in order to provide Clients with realistic assessments, in respect of the premium payable in lieu of Statutory Lease removal process.
The Valuation service includes:
- Property inspection & measurement (where access is permitted)
- Review of Lease (in terms of defining the unexpired term)
- Review of comparable evidence LEP calculation
- Provision of lease premium calculation
- Provision of a formal valuation
- Recommendations as to amount of premium payable, in lieu of Lease Extension.
- Why should I extend my lease?
A lease gives you the right to use a property for an agreed period of time only. It is a wasting asset and is not to be considered in the same way as a freehold property. When your leasehold interest in a flat or house gets shorter, the capital value of the leased property decreases and it becomes increasingly more expensive to extend the lease term.
It is more difficult to sell a property with a short lease; indeed, mortgage lenders tend not to lend on leasehold properties with an unexpired lease terms of less than 80 years. In this case trying to sell a shorter lease term property can take a long time, it’s a fact that the buyers’ market is also reduced, which does impact on sale price.
Reasons to extend your lease:
- Residential properties with short leases suffer faster depreciation.
- Extending a residential lease of more than 81 years unexpired is considerably less expensive than extending the same premises, with a like for like lease at 7 years.
- Approximately 60% of mortgage lenders won’t lend on properties with short unexpired leases, which can make selling the property difficult.
- When should you extend a lease?
A leasehold extension should be negotiated before the remaining term has less than 80 years left. Qualifying tenants may be able to extend a lease by 90 years plus the current remaining term left on their lease. Ideally a lease extension should be done as soon as possible to avoid costly implications associated with short leases.
- Can a landlord refuse to extend a lease?
A landlord can’t refuse to extend a lease if you are deemed to be a qualifying tenant. To qualify you must have held the leasehold interest for no less than 2 years.
If this is the case, you can ask your landlord for a lease extension at any time and you will normally have a right to extend the lease. If you have not occupied the property for more than 2 years, the freeholder has the right to refuse to extend the lease, although you may be able to enter into a lease extension negotiation to settle this.
Crown properties are exempt from statutory lease extensions, to that end special terms for negotiation must be entered into by the parties.
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