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Top reasons for Pimlico lease extension


Why you should commence your Pimlico lease extension today:

A Pimlico lease depreciates with the years remaining on the lease.

The rule of thumb is, all other things holding equal, the shorter the lease the more costly the premium. Qualifying leaseholders in Pimlico may extend the lease for a further ninety years under the 1993 Leasehold Reform Act. Do give careful consideration before delaying your Pimlico lease extension. Postponing the costs now simply escalates the amount you will eventually be required to pay for a lease extension.

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

It is conventional wisdom that a property with more than 100 years unexpired lease term is worth approximately the same as a freehold. Where an further ninety years added to all but the shortest lease, the property will be equivalent in value to a freehold for many years ahead.

Mortgage lenders will not issue a mortgage with a short lease

Most mortgage lenders have constrained their lending criteria in the last ten years and borrowers are finding it increasingly difficult to raise finance or re-mortgage against property with shorter lease terms, particularly under 75 years as they are considered to be unacceptable for lending purposes.

Lender Requirement
Barnsley Building Society 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
Halifax Minimum 70 years from the date of the mortgage.
Leeds Building Society 85 years remaining from the start 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
Virgin 85 years at the time of completion. If it's less, we require it to be extended on or before completion.

Why use us for your lease extension in Pimlico?

The lawyers that we work with procure Pimlico 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 lawyer we work with provide it.

Pimlico Lease Extension Example Cases:

Joseph, Pimlico, London,

Joseph owned a high value flat in Pimlico on the market with a lease of a little over fifty eight years unexpired. Joseph informally approached his landlord being a well known London-based freehold company and enquired on a premium to extend the lease. The landlord indicated a willingness to grant an extension taking the lease to 125 years subject to an increased rent to £125 annually. Ordinarily, ground rent would not be due on a lease extension were Joseph to invoke his statutory right. Joseph obtained expert legal guidance and secured an acceptable resolution without resorting to tribunal and ending up with a market value flat.

Pimlico case:

Last Summer we were approach by Mrs Zoe Stewart , who moved into a studio apartment in Pimlico in August 2004. We are asked if we could estimate the compensation to the landlord could be to prolong the lease by an additional years. Similar premises in Pimlico with 100 year plus lease were valued around £174,200. The average ground rent payable was £55 invoiced every twelve months. The lease terminated on 3 September 2075. Given that there were 51 years unexpired we estimated the compensation to the freeholder for the lease extension to be between £31,400 and £36,200 not including fees.

Decision in Westminster

An example of a Lease Extension matter before the tribunal for a Pimlico property is Flats 12A & 19, Evelyn Mansions Carlisle Place in June 2009. The Tribunal held that the price to be paid for the new lease of Flat 12A is £168,824, For the other flat the price was set at £169,110 This case affected 2 flats. The unexpired term was 56 years.