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Top reasons for Manchester lease extension


Why you should start your Manchester lease extension today:

Increase your lease and increase your Manchester property value

It’s a harsh certainty that a Manchester residential lease is a deteriorating asset. The lease value reduces in proportion to its lease length. The extent of this is taken for granted in the first few years due to the loss of value being disguised by increases in the Manchester property market.Where your lease has approximately 90 years left, you need to start considering 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 falls below eighty years - otherwise a higher premium will be payable. Most flat owners in Manchester will be able to extend under the legislation; however a conveyancing solicitor will be able to confirm whether you qualify for an extension. In some situations you may not qualify. There are also strict deadlines and procedures to be adhered to once the process has commenced and you will need to be guided by your lawyer for the duration of the formalities.

An extended lease has roughly the same value as a freehold

It is conventional wisdom that a residential leasehold with in excess of 100 years unexpired lease term is worth roughly the equivalent as a freehold. Where an further 90 years added to all but the shortest lease, the premises will be equivalent in value to a freehold for decades to come.

Lenders will not finance a property with a short lease

Mortgage lenders are less likely to grant a mortgage on a domestic property in Manchester with a short lease. Many lenders simply refuse a mortgage on leases with less than 75 years remaining.

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.
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

What makes us experts in Manchester lease extensions?

Irrespective of whether you are a tenant or a freeholder in Manchester,the lease extension solicitors that we work with will always be willing to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Manchester valuers.

Manchester Lease Extension Case Summaries:

Gabriel, Manchester, Greater Manchester,

Gabriel was the the leasehold owner of a high value flat in Manchester on the market with a lease of just over fifty eight years remaining. Gabriel on an informal basis spoke with his landlord a well known Manchester-based freehold company and enquired on a premium to extend the lease. The landlord indicated a willingness to extend the lease to 125 years subject to a new rent at the outset set at £150 per annum and doubled every 25 years thereafter. Ordinarily, ground rent would not be due on a lease extension were Gabriel to exercise his statutory right. Gabriel obtained expert legal guidance and was able to make a more informed judgement and handle with the matter and sell the property.

Manchester case:

In 2012 we were called by Mr and Mrs. A Smith who, having owned a one bedroom flat in Manchester in November 2009. The question was if we could shed any light on how much (approximately) compensation to the landlord would be for a 90 year lease extension. Comparative homes in Manchester with an extended lease were worth £232,800. The mid-range amount of ground rent was £45 billed annually. The lease expiry date was on 7 October 2089. Given that there were 65 years as a residual term we approximated the compensation to the freeholder for the lease extension to be within £13,300 and £15,400 plus fees.

Manchester case:

Mrs U Morgan completed a garden flat in Manchester in June 1999. The question was if we could approximate the premium would likely be to prolong the lease by an additional years. Comparative properties in Manchester with a long lease were valued about £275,000. The mid-range ground rent payable was £55 invoiced quarterly. The lease expired in 2100. Having 76 years remaining we estimated the compensation to the freeholder to extend the lease to be within £9,500 and £11,000 not including legals.