It’s an underpublicised truth that a City Of London residential lease is a deteriorating asset. The lease value drops in proportion to its lease length. The extent of this is not fully appreciated in the early years due to the depreciation being disguised by increases in the City Of London property market.Where your lease has approximately 90 years left, you should start thinking about a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease slips below 80 years - otherwise a higher amount will be payable. The majority of flat owners in City Of London will be able to extend under the legislation; however a lawyer should be able to confirm whether you are eligibility. In some situations you may not be entitled. There are also strict timeframes and procedures to follow once the process is instigated and you will need to be guided by your conveyancing solicitor from beginning to end of the process.
It is conventional wisdom that a property with in excess of 100 years remaining is worth roughly the equivalent as a freehold. Where an additional 90 years added to all but the shortest lease, the premises will be equivalent in value to a freehold for many years in the future.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Barnsley Building Society | 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term. |
| Godiva Mortgages | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| Santander | You must report the unexpired lease term to us and await our instructions if: 1. the unexpired term assumed by our valuer is between 55 and 82 years, but the actual unexpired term differs by more than one year (whether longer or shorter); or 2. the unexpired term assumed by our valuer is more than 82 years but the actual unexpired term is less than 82 years; or 3. no valuation report is provided However, we will not accept a lease where on expiry of the mortgage: (i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or (ii) less than 30 years remain and the loan is repaid on a capital and interest basis We will accept a lease that has been extended under the provisions of the Leasehold Reform Act 1993 provided statutory compensation would be available to the leaseholder. |
| Skipton Building Society | 85 years from the date of completion of the mortgage For Buy to Let cases: - lettings must not breach any of the lessee’s covenants; and - consent of the lessor to lettings must be obtained if necessary |
Lease extensions in City Of London can be a difficult process. We recommend you secure guidance from a conveyancing solicitor and surveyor with experience in this area.
We provide you with an expert from a selection of lease extension solicitors, which ensures a targeted and efficient service as you have a dedicated port of call with an individual lawyer. Our lease extension solicitors have in-depth market knowledge procuring City Of London lease extensions and further afield, as well as any potential issues which may arise as well as problems with the Leasehold Valuation Tribunal.
Sebastian owned a conversion flat in City Of London on the market with a lease of fraction over sixty years unexpired. Sebastian on an informal basis approached his freeholder a well known Bristol-based freehold company for a lease extension. The freeholder indicated a willingness to extend the lease to 125 years subject to a new rent to start with set at £200 per annum and doubled every twenty five years thereafter. No ground rent would be payable on a lease extension were Sebastian to invoke his statutory right. Sebastian obtained expert advice and was able to make a more informed decision and deal with the matter and readily saleable.
Last Autumn we were phoned by Mr Eliot Clark , who owned a ground floor apartment in City Of London in May 2012. The question was if we could estimate the premium could be for a 90 year lease extension. Similar flats in City Of London with a long lease were worth £208,600. The mid-range ground rent payable was £60 collected quarterly. The lease finished in 2082. Having 57 years as a residual term we estimated the premium to the freeholder to extend the lease to be within £30,400 and £35,200 not including legals.
Dr Rachael González was assigned a lease of a studio flat in City Of London in May 2010. We are asked if we could approximate the premium would likely be to prolong the lease by an additional years. Identical homes in City Of London with an extended lease were valued about £200,000. The mid-range amount of ground rent was £50 billed per annum. The lease termination date was on 12 April 2102. Considering the 77 years outstanding we calculated the compensation to the landlord for the lease extension to be within £8,600 and £9,800 plus costs.