It’s an underpublicised certainty that a Sale residential lease is a wasting asset. The lease value drops in proportion to its lease length. The extent of this is not fully appreciated in the first few years due to the reduction being disguised by increases in the Sale property market.Once your lease gets to 85ish years, you need to start thinking about a lease extension. If lease term dips below 80 years, you will then be required to pay 50% of the property's 'marriage value' in addition to the usual cost of the lease extension to the landlord. Marriage value is the amount of additional value that a lease extension will add the property Most flat owners in Sale will be able to extend under the legislation; however a conveyancer will be able to confirm if you qualify for an extension. In some situations you may not be entitled. 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 conveyancer for the duration of the formalities.
It is generally accepted that a residential leasehold with over 100 years remaining is worth approximately the equivalent as a freehold. Where an further ninety years added to any lease with more than 30 years unexpired, the premises will be equivalent in value to a freehold for many years in the future.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| 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. |
| National Westminster Bank | Mortgage term plus 30 years. For Shared Ownership, the remaining term of the lease must also be not less than 75 years at the outset of the mortgage. |
| Santander | You must report the unexpired lease term to us and await our instructions if: 1. the unexpired term assumed by our valuer is between 55 and 82 years, but the actual unexpired term differs by more than one year (whether longer or shorter); or 2. the unexpired term assumed by our valuer is more than 82 years but the actual unexpired term is less than 82 years; or 3. no valuation report is provided However, we will not accept a lease where on expiry of the mortgage: (i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or (ii) less than 30 years remain and the loan is repaid on a capital and interest basis We will accept a lease that has been extended under the provisions of the Leasehold Reform Act 1993 provided statutory compensation would be available to the leaseholder. |
| TSB | Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption. |
The conveyancers that we work with handle Sale 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.
After protracted negotiations with the landlord of her first floor flat in Sale, Chantelle initiated the lease extension process as the 80 year threshold was swiftly advancing. The transaction was concluded in September 2010. The freeholder’s fees were kept to an absolute minimum.
Last Autumn we were called by Mr and Mrs. D Sánchez , who was assigned a lease of a ground floor apartment in Sale in May 1995. We are asked if we could approximate the compensation to the landlord could be for a 90 year lease extension. Comparable properties in Sale with an extended lease were valued around £218,000. The mid-range ground rent payable was £45 billed every twelve months. The lease expired on 18 September 2088. Considering the 63 years unexpired we approximated the compensation to the freeholder for the lease extension to be within £17,100 and £19,800 exclusive of expenses.
In 2012 we were called by Dr Kate Bernard who, having purchased a one bedroom flat in Sale in January 1995. We are asked if we could shed any light on how much (approximately) premium would likely be for a 90 year lease extension. Similar flats in Sale with an extended lease were worth £265,000. The average amount of ground rent was £55 invoiced annually. The lease concluded on 2 October 2099. Considering the 74 years remaining we estimated the premium to the landlord to extend the lease to be within £9,500 and £11,000 not including fees.