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Why you should start your Brixton lease extension


Why you should commence your Brixton lease extension today:

A Brixton leasehold property depreciates with the years remaining on the lease.

It’s an underpublicised certainty that a Brixton residential lease is a wasting asset. The lease value drops in proportion to its lease length. The extent of this is taken for granted in the early years due to the deflation being disguised by increases in the Brixton property prices.Once your lease nears 85ish years, you should start considering a lease extension. If lease term drops under eighty years, you will end up paying half of the property's 'marriage value' on top of the usual cost of the lease extension to the landlord. Marriage value is the amount of additional value that a lease extension will add the property Most leasehold owners in Brixton will be able to extend under the legislation; however a conveyancing solicitor will be able to confirm if you are eligibility. In some situations you may not be entitled. There are also strict timeframes and procedures to be adhered to once the process has commenced and you will need to be guided by your conveyancer for the duration of the formalities.

Brixton property with a lease extension is almost the same value as a freehold

It is conventional wisdom that a property with in excess of one hundred years remaining is worth roughly the equivalent as a freehold. Where an further 90 years added to any lease with more than 45 years unexpired, the property will be equivalent in value to a freehold for many years ahead.

Lenders may decide not to loan monies with a short lease

Most banks have narrowed their lending criteria in the last ten years and borrowers are finding it increasingly difficult to raise funding or re-mortgage against flats with shorter lease terms, particularly under seventy years as they are considered to be insufficient for lending purposes.

Lender Requirement
Accord Mortgages 85 years from the date of completion of the mortgage. Please ensure that you explain the implications of a short term lease to the borrower.
Bank of Scotland Minimum 70 years from the date of the mortgage.
TSB Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption.
The Mortgage Works Minimum unexpired lease term is 70 years with 30 years remaining at the end of the mortgage term.
Where the unexpired lease term is different to that recorded on the mortgage offer, the following clarifies if we need to be informed:

Second hand property:
- If the unexpired lease term on the offer is 85 years or more - only advise us if the actual lease term is less than 85 years
- if the unexpired lease term on the offer is less than 85 years – advise us if the actual lease term is different than reported
- For equity share applications - advise us if the actual lease term is different than reported on the offer

New build property:
- If the unexpired lease term stated on the offer is 125 years (flat) / 250 years (house) or more - only advise us if the actual lease term is less than 125 years (flat) / 250 years (house)
- For equity share applications - always advise us if the actual lease term is different than reported on the offer

Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against. See the guidance below.

SECOND HAND PROPERTIES

Unacceptable - advise Issuing Office (Will be declined):
- Unexpired lease term less than 70 years
- Less than 30 years remaining at the end of the mortgage term
- Ground Rent greater than 0.5% of the property value
- Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) - acceptable if doubles every 20 years or more
- Ground Rent is compounded RPI
- Ground Rent review period less than or equal to 5 years

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
- Unexpired lease term is 70 to 85 years
- Ground Rent greater than 0.1% and less than or equal to 0.5% of the property value
- Ground Rent escalation is linked to any indices greater than RPI
- Ground Rent escalation is linked to the value of the building*
- Ground Rent review period is greater than 5 and less than 10 years
- Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc
- Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover)
- Service Charges greater than 1.0% of property value p/a (please provide details of what the charges cover)
- Anything that appears onerous, unusual or out of the ordinary

Acceptable (no requirement to advise Issuing Office):
- Unexpired lease term greater than 85 years
- Ground Rent less than or equal to 0.1% of the property value
- Ground Rent review period greater than or equal to 10 years
- Ground Rent escalation less than or equal to RPI

NEW BUILD PROPERTIES (includes office conversions)

Unacceptable - advise Issuing Office (will be declined):
- Unexpired lease term less than 125 years on a new build flat or less than 250 years on a new build house
- Any lease which is subject to a ground rent (or annual rent) being charged which is more than on a peppercorn basis
- Any lease which is subject to a ground rent (or annual rent) being reviewed and altered on any review basis or methodology

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
- Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc
- Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover)
- Service Charges greater than 1.0% of property value p/a (please provide details of what the charges cover)
- Anything else appears onerous, unusual or out of the ordinary

Acceptable (no requirement to advise Issuing Office):
- Unexpired lease term greater than or equal to 125 years on a new build flat or greater than or equal to 250 years on a new build house
- A lease subject to a peppercorn ground rent (annual rent) charges

For the avoidance of doubt, any new build properties completed but not sold pre 30 June 2022 will only be acceptable if the lease conforms to the above guidance

* Where the Ground Rent escalation is linked to the value of the building, please provide the following:
- How is the value of the block/unit currently calculated and if the assessment relates to the block(s), how is the Ground Rent calculated/apportioned per property?
- The current valuation and Ground Rent for each unit
- What is the mechanism for future valuations of the block and how is the Ground Rent calculated/apportioned?
- What is the right of appeal? And is this a documented process within the lease?
- Who bears the cost of the valuation (and appeal) process?
- Confirmation the review period is not less than twenty years

LEASE EXTENSIONS

We require all lease extensions to be completed under the Leasehold Reform Housing and Urban Development Act 1993 and to meet the above criteria as a minimum. Where you become aware that it does not meet these requirements, please refer to the Issuing Office
Yorkshire Building Society 85 years from the date of completion of the mortgage. Please ensure that you explain the implications of a short term lease to the borrower.

Why use us for your lease extension in Brixton?

Retaining our service gives you increased control over the value of your Brixton leasehold, as your property will be more valuable and marketable in relation to the lease length should you decide to sell. The conveyancers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.

Brixton Lease Extension Example Cases:

Joshua, Brixton, South London,

Joshua owned a high value flat in Brixton on the market with a lease of a few days over fifty eight years remaining. Joshua on an informal basis contacted his landlord being a well known London-based freehold company and enquired on a premium to extend the lease. The landlord indicated a willingness to extend the lease to 125 years on the basis of a new rent initially set at £200 per annum and doubled every twenty five years thereafter. No ground rent would be due on a lease extension were Joshua to exercise his statutory right. Joshua obtained expert legal guidance and secured satisfactory resolution informally and ending up with a market value flat.

Brixton case:

Last Summer we were called by Mrs Kate Williams , who owned a garden apartment in Brixton in June 2012. We are asked if we could shed any light on how much (approximately) premium would be for a 90 year extension to my lease. Comparable residencies in Brixton with 100 year plus lease were worth £240,600. The average ground rent payable was £60 invoiced every twelve months. The lease end date was in 2086. Having 62 years as a residual term we calculated the compensation to the freeholder to extend the lease to be within £21,900 and £25,200 not including costs.

Decision in Lambeth

An example of a Freehold Enfranchisement matter before the tribunal for a Brixton property is 66 Southwell Road in March 2012. By Order of Deputy District Judge Stone dated 25 January 2012 a vesting order was made. The determination of the purchase price was referred to the Tribunal who decided that the amount payable for the freehold should be£29,612.00 This case related to 3 flats. The number of years remaining on the existing lease(s) was 72.58 years.