For anyone whose Shaftesbury home is held on a long lease, our message is clear – if nothing is done, the property will eventually revert to the freeholder, leaving you empty-handed. The fewer the years remaining the less it is worth and the more expensive it will be to extend the lease.
Leasehold properties in Shaftesbury with more than 100 years remaining on the lease are sometimes referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your premises. In such situations there is often little to be gained by purchasing the freehold unless savings on ground rent and service charges merit 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. |
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage should be declined (see exception below). Leases with greater than 70 years but fewer than 85 years remaining must be referred to issuing office. Leases with fewer than 70 years should only be referred to the issuing office where the following scenario applies, as discretion may be applied subject to bank approval: • Property is located in any of the following prestigious developments: Cadogan, Crown, Grosvenor, Howard de Walden, Portman or Wellcome Trust Estates in Central London AND • The value of the property subject to the short remaining term is £500,000 or more AND • The loan to value does not exceed 90% for purchases, 90% like for like re-mortgages, 80% for re-mortgages with any element of capital raising and 80% for existing Barclays mortgage borrowers applying for additional borrowing; |
| 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. |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
The conveyancing solicitors that we work with undertake Shaftesbury 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.
Last Winter Luca, came perilously near to the eighty-year mark with the lease on his purpose- built apartment in Shaftesbury. In buying his flat two decades ago, the unexpired term was of little bearing. Fortunately, he realised he would soon be paying an escalated premium for a lease extension. Luca extended the lease just under the wire last March. Luca and the freeholder via the management company subsequently settled on sum of £5,000 . If the lease had slipped to less than 80 years, the amount would have become more exhorbitant by a minimum £1,100.
Last month we were approach by Dr Jason Baker , who acquired a newly refurbished flat in Shaftesbury in November 2002. We are asked if we could estimate the price could be to extend the lease by a further 90 years. Identical properties in Shaftesbury with an extended lease were worth £166,800. The mid-range ground rent payable was £50 collected quarterly. The lease expired on 17 January 2075. Considering the 50 years left we estimated the compensation to the landlord to extend the lease to be within £32,300 and £37,400 exclusive of legals.
In 2013 we were approached by Mr and Mrs. K King who, having took over the lease of a basement flat in Shaftesbury in January 1999. The dilemma was if we could estimate the compensation to the landlord would likely be to prolong the lease by a further 90 years. Comparative properties in Shaftesbury with 100 year plus lease were worth £280,000. The average ground rent payable was £45 invoiced every twelve months. The lease finished on 9 January 2095. Taking into account 70 years as a residual term we estimated the compensation to the landlord to extend the lease to be between £12,400 and £14,200 exclusive of legals.