North West London leases on residential properties are gradually losing value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of the lease becomes more expensive. It is the case that most North West London tenants have the right to extend their lease by an additional ninety years by virtue of the 1993 Leasehold Reform Act. Where you are a leasehold owner in North West London you would be well advised to investigate if your lease has between seventy and 90 years left. In particular once the remaining lease term slips under 80 years, the amount payable for any lease extension increases dramatically as part of the premium you pay is what is known as a marriage value
Leasehold premises in North West London with in excess of 100 years left on the lease are sometimes referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your property. In such situations there is often little to be gained by purchasing the freehold unless savings on ground rent and service charges justify it.
| 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. |
| Leeds Building Society | 85 years remaining from the start of the mortgage. |
| 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 |
The conveyancing solicitors that we work with procure North West London lease extensions and help protect your position. A lease extension can be arranged to be completed to coincide with a change of ownership so the costs of the lease extension are paid for using part of the sale proceeds. You really do need expert legal advice in this difficult and technical area of law. The conveyancer we work with provide it.
Harry was the the leasehold owner of a high value flat in North West London on the market with a lease of fraction over 72 years unexpired. Harry informally contacted his landlord being a well known Bristol-based freehold company and enquired on a premium to extend the lease. The landlord was keen to give an extension on non-statutory terms taking the lease to 125 years on the basis of a rise in the rent to £50 annually. Ordinarily, ground rent would not be payable on a lease extension were Harry to exercise his statutory right. Harry obtained expert legal guidance and secured satisfactory deal without going to tribunal and sell the property.
Last year we were called by Mr and Mrs. Y Turner , who purchased a purpose-built apartment in North West London in August 2002. We are asked if we could approximate the compensation to the landlord would likely be for a 90 year extension to my lease. Identical homes in North West London with a long lease were worth £270,000. The average amount of ground rent was £55 invoiced yearly. The lease finished in 2099. Given that there were 75 years remaining we calculated the premium to the landlord to extend the lease to be within £9,500 and £11,000 exclusive of professional charges.
Last Autumn we were e-mailed by Mr George Walker , who completed a studio flat in North West London in September 1996. We are asked if we could estimate the premium could be for a 90 year extension to my lease. Identical properties in North West London with 100 year plus lease were in the region of £173,800. The mid-range amount of ground rent was £60 collected annually. The lease expired in 2079. Having 55 years as a residual term we approximated the compensation to the landlord to extend the lease to be between £31,400 and £36,200 exclusive of professional charges.