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Top reasons for Hilton lease extension


Main reasons to start your Hilton lease extension today:

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

Hilton residential property owned on a long lease is a depreciating asset because a leaseholder merely owns the property for a set term.

Hilton property with a lease extension has roughly the same value as a freehold

It is generally considered that a property with in excess of 100 years remaining is worth approximately 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 decades to come.

Mortgage lenders may not issue a mortgage on a short lease

The propensity since 2008 has been for lenders to tighten lending criteria across the board - this has extended to the property over which the home loan is to be charged. This has meant the unexpired lease term required by banks has increased. Historically mortgage companies would lend on a lease with twenty years plus the term of the loan - typically 50 year leases but those requirements evolved by the requirement for longer and longer leases - many use a minimum term of 75 years as standard.

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

Please ensure that all lender enquiries are submitted (with full documentation/requirements) at least 2 weeks prior to exchange to allow sufficient time for review and decisioning.

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

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

Hilton Lease Extension Case Studies:

Liam, Hilton, Derbyshire,

Liam was the the leasehold owner of a studio apartment in Hilton on the market with a lease of a little over 61 years unexpired. Liam informally approached his freeholder being a well known Bristol-based freehold company for a lease extension. The landlord indicated a willingness to grant an extension taking the lease to 125 years subject to a new rent at the outset set at £150 per annum and increase every 25 years thereafter. Ordinarily, ground rent would not be due on a lease extension were Liam to invoke his statutory right. Liam procured expert advice and was able to make a more informed judgement and deal with the matter and ending up with a market value flat.

Hilton case:

Dr Ellie Miller owned a recently refurbished flat in Hilton in September 2010. The question was if we could shed any light on how much (roughly) price could be to prolong the lease by 90 years. Comparative properties in Hilton with a long lease were in the region of £285,000. The mid-range ground rent payable was £55 billed every twelve months. The lease termination date was on 15 March 2104. Having 79 years remaining we calculated the premium to the landlord to extend the lease to be between £13,300 and £15,400 not including legals.

Hilton case:

Mr and Mrs. A Williams took over the lease of a one bedroom apartment in Hilton in June 2009. We are asked if we could shed any light on how much (approximately) price would be to prolong the lease by an additional years. Comparative homes in Hilton with 100 year plus lease were worth £193,400. The average amount of ground rent was £65 invoiced yearly. The lease came to a finish in 2084. Having 59 years left we estimated the premium to the landlord to extend the lease to be between £21,900 and £25,200 exclusive of costs.