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Top reasons for Earley lease extension


Why you should commence your Earley lease extension today:

Increase your lease and increase your Earley property value

The re-sale value of a leasehold property in Earley depends on how many years the lease has left to run. If it is near to or less than eighty years you should foresee difficulties on re-sale, so it is recommended to arrange for the lease to be extended ahead of purchasing. It is preferable to commence the lease extension process when the lease still has 82 years remaining so that a lease extension can be addressed prior to the eighty year cut off point. Leasehold Reform legislation entitles Earley qualifying lessees to a ninety year extension added to their unexpired lease term (ie if your lease has 50 years left the statutory lease extension will provide a new term of 140 years). The reason of the valuation is to arrive at an opinion of the sum payable by the lessee to the freeholder for the purchase of the lease extension.

An extended lease has roughly the same value as a freehold

It is conventional wisdom that a property with more than 100 years remaining is worth roughly the same as a freehold. Where an additional 90 years added to all but the shortest lease, the residence will be worth the same as a freehold for decades to come.

Lenders may decide not to loan monies with a short lease

Banks and building societies are making their criteria more stringent and many now require flats to have a minimum of sixty if not seventy years left at the expiry of the mortgage. Considering many flats in Earley were built in the 1950s, 1960s and 1970s this means many now need to be extended if they wish to obtain a mortgage.

Lender Requirement
Lloyds TSB Scotland Minimum 70 years from the date of the mortgage.
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
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

Get in touch with one of our Earley lease extension solicitors or enfranchisement solicitors

Engaging our service will provide you increased control over the value of your Earley leasehold, as your property will be more valuable and marketable in terms of lease length should you wish to sell. The conveyancing solicitors that we work with have a wealth of experience of handling many hundreds of lease extensions or freehold purchase transactions.

Earley Lease Extension Case Studies:

Matthew, Earley, Berkshire

16 months ago Matthew, came critically close to the 80-year mark with the lease on his first floor flat in Earley. In buying his property two decades ago, the lease term was of minimal relevance. Fortunately, he realised he needed to take steps soon on a lease extension. Matthew was able to extend his lease just under the wire last April. Matthew and the freeholder via the management company subsequently settled on a premium of £5,500 . If he not met the deadline, the premium would have become more exhorbitant by at least £900.

Earley case:

Mr S Roux moved into a basement apartment in Earley in January 2011. We are asked if we could estimate the premium could be to prolong the lease by a further 90 years. Comparable flats in Earley with an extended lease were valued about £260,200. The average amount of ground rent was £65 invoiced quarterly. The lease concluded in 2090. Given that there were 66 years outstanding we estimated the compensation to the landlord for the lease extension to be within £15,200 and £17,600 not including professional charges.

Earley case:

Mr James Vincent bought a garden flat in Earley in August 1995. We are asked if we could approximate the premium would likely be for a ninety year lease extension. Similar properties in Earley with 100 year plus lease were valued around £198,800. The average ground rent payable was £55 invoiced every twelve months. The lease lapsed on 9 January 2079. Given that there were 55 years as a residual term we estimated the compensation to the freeholder for the lease extension to be within £33,300 and £38,400 not including legals.