The re-sale value of a leasehold property in Soho is impacted by how long the lease has left to run. If it is close to or less than 80 years you should anticipate problems on re-sale, so it is recommended to arrange for the lease to be extended before buying. Ideally one should start the process of extending the lease is when the lease still has 82 years remaining so that a lease extension can be concluded prior to the eighty year mark. Statute entitles Soho qualifying lessees to acquire a lease extension of 90 years in addition to the remaining length of the lease at a peppercorn rent (that is, rent free). The intention of the valuation is to determine the premium payable by the lessee to the freeholder for the purchase of the lease extension.
It is conventional wisdom that a residential leasehold with more than one hundred years unexpired lease term is worth roughly the equivalent as a freehold. Where an additional ninety years added to any lease with more than 35 years left, the property will be equivalent in value to a freehold for decades to come.
| Lender | Requirement |
|---|---|
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| Godiva Mortgages | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| Leeds Building Society | 85 years remaining from the start of the mortgage. |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
| Virgin | 85 years at the time of completion. If it's less, we require it to be extended on or before completion. |
The conveyancers that we work with procure Soho 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.
Archie was the the leasehold proprietor of a conversion apartment in Soho being marketed with a lease of just over sixty years unexpired. Archie on an informal basis approached his landlord a well known Manchester-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 on the basis of a new rent to start with set at £100 per annum and doubled every 25 years thereafter. Ordinarily, ground rent would not be due on a lease extension were Archie to exercise his statutory right. Archie obtained expert legal guidance and was able to make a more informed decision and deal with the matter and ending up with a market value flat.
In 2010 we were contacted by Mrs Katie Martinez who, having was assigned a lease of a studio flat in Soho in May 2010. The question was if we could approximate the premium would likely be for a ninety year extension to my lease. Comparative residencies in Soho with a long lease were in the region of £275,000. The average ground rent payable was £65 billed per annum. The lease concluded in 2093. Having 68 years left we approximated the compensation to the freeholder for the lease extension to be between £12,400 and £14,200 not including fees.
An example of a Freehold Enfranchisement decision for a Soho flat is 20 Avonwick Road in July 2013. The Tribunal was dealing with an application under Section 26 of the Leasehold Reform Housing and Urban Development Act 1993 for a determination of the freehold value of the property. It was concluded that the price to be paid was Fifteen Thousand Nine Hundred and Seventy (£15,970) divided as to £8,200 for Flat 20 and £7,770 for Flat 20A This case affected 1 flat. The unexpired lease term was 73.26 years.