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Why you should commence your Egremont lease extension


Why you should start your Egremont lease extension today:

Increase your lease and increase your Egremont property value

Egremont residential property held on a long lease is a wasting asset as the leaseholder only owns the property for a period of years.

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

It is generally considered that a residential leasehold with over one hundred years unexpired lease term is worth approximately the same as a freehold. Where an additional ninety years added to all but the shortest lease, the premises will be worth the same as a freehold for many years ahead.

Mortgage lenders may not grant a mortgage on a short lease

Lenders are inclined not grant a mortgage on short residential leases. You are likely to experience difficulties if you need to sell your flat in Egremont if the unexpired lease term is below the criteria set by most mortgage companies. Different mortgage companies have different requirements but on the whole they are looking for an unexpired term of at least seventy years.

Lender Requirement
Birmingham Midshires Minimum 70 years from the date of the mortgage.
Chelsea 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.
Halifax Minimum 70 years from the date of the mortgage.
Nationwide Building Society - Our minimum unexpired lease term is 55 years, except where lending is over 85% of the purchase price/valuation on a second hand flat, in which case our minimum unexpired term is 90 years.
- There must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start).

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
- Where lending is over 85% of the purchase price/valuation on a second hand flat and the unexpired lease term on the offer is 90 years or more - only advise us if the actual lease term is less than 90 years.

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 55 years
- Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat
- 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 is 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 55 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% 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 (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat)
- 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 (does not apply to Shared Ownership)
- 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 charged which is more than on a peppercorn basis

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% 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 Issuing Office.
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.

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

Regardless of whether you are a tenant or a landlord in Egremont,the lease extension experts that we work with will always be willing to discuss any residential leasehold matters and offer you the benefit of their in-depth market knowledge and the close ties they enjoy with Egremont valuers.

Egremont Lease Extension Case Summaries:

James, Egremont, Cumbria

In recent months James, started to get near to the eighty-year mark with the lease on his ground floor flat in Egremont. In buying his flat two decades ago, the lease term was of no relevance. Luckily, it dawned on him that he would imminently be paying an inflated amount for a lease extension. James was able to extend his lease just under the wire last April. James and the freeholder subsequently settled on sum of £5,500 . If the lease had fallen to less than eighty years, the premium would have increased by a minimum £1,050.

Egremont case:

Dr Elizabeth Evans owned a ground floor apartment in Egremont in October 2009. The dilemma was if we could shed any light on how much (approximately) compensation to the landlord would be for a 90 year extension to my lease. Comparable flats in Egremont with 100 year plus lease were valued about £206,200. The mid-range ground rent payable was £60 billed annually. The lease finished on 20 June 2080. Considering the 56 years as a residual term we estimated the premium to the freeholder for the lease extension to be between £32,300 and £37,400 plus legals.

Egremont case:

In 2013 we were e-mailed by Dr Archie Brown who, having acquired a basement apartment in Egremont in June 2001. The question was if we could approximate the compensation to the landlord could be to prolong the lease by an additional years. Identical flats in Egremont with 100 year plus lease were worth £300,000. The average ground rent payable was £50 collected monthly. The lease lapsed on 3 January 2100. Considering the 76 years as a residual term we calculated the compensation to the freeholder for the lease extension to be within £8,600 and £9,800 exclusive of legals.