The market value of a leasehold property in Penzance depends on how long the lease has left to run. If it is near to or less than eighty years you should expect difficulties on re-sale, so it is advisable to arrange for a lease extension ahead of buying. Ideally one should start the process of extending the lease is when a lease still has 82 years to run so that a lease extension can be finalised prior to the 80 year cut off point. Current legislation enables Penzance qualifying lessees to an additional term of ninety years over and above the unexpired term, at a peppercorn rent (no ground rent). The reason of the valuation is to determine the sum payable by the lessee to the freeholder for the acquisition of the lease extension.
Leasehold premises in Penzance with over 100 years left on the lease are often 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 reversionary interest unless savings on ground rent and maintenance charges justify it.
| Lender | Requirement |
|---|---|
| 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. |
| Lloyds TSB Scotland | Minimum 70 years from the date of the mortgage. |
| 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. |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
Regardless of whether you are a tenant or a freeholder in Penzance,the lease extension lawyers that we work with will always be prepared to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Penzance valuers.
In 2014 Elijah, started to get near to the eighty-year mark with the lease on his purpose- built apartment in Penzance. In buying his property 19 years previously, the lease term was of no bearing. As luck would have it, he recognised he would soon be paying way over the odds for a lease extension. Elijah extended the lease at the eleventh hour in May. Elijah and the landlord who owned the flat above in the end agreed on the final figure of £5,000 . If the lease had dropped lower than eighty years, the figure would have become more costly by a minimum £1,000.
Last month we were called by Mr and Mrs. L Jones , who was assigned a lease of a garden flat in Penzance in May 1998. The dilemma was if we could approximate the price would likely be for a 90 year extension to my lease. Similar premises in Penzance with a long lease were valued about £270,000. The mid-range amount of ground rent was £55 billed every twelve months. The lease concluded in 2100. Given that there were 75 years as a residual term we calculated the compensation to the landlord for the lease extension to be within £9,500 and £11,000 not including fees.
In 2009 we were e-mailed by Dr O Moore who, having took over the lease of a one bedroom apartment in Penzance in September 2001. We are asked if we could approximate the price could be for a ninety year extension to my lease. Comparable flats in Penzance with 100 year plus lease were valued around £166,400. The average amount of ground rent was £60 invoiced every twelve months. The lease ended on 2 January 2079. Taking into account 54 years as a residual term we estimated the premium to the freeholder to extend the lease to be between £32,300 and £37,400 not including fees.