Unfortunately that a Totnes 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 loss of value being disguised by increases in the Totnes property market.Once your lease gets to 85ish years, you should start considering a lease extension. If lease term falls under eighty years, you will end up paying 50% of the property's 'marriage value' in addition to the usual cost of the lease extension to the landlord. The marriage fee is the amount of additional value that a lease extension will add the property Most flat owners in Totnes will be able to extend under the legislation; however a conveyancing solicitor should be able to confirm whether you are eligibility. In some cases you may not qualify. There are also strict timeframes and procedures to be adhered to once the process has commenced and you will need to be guided by your lawyer for the duration of the process.
It is generally accepted that a residential leasehold with in excess of 100 years remaining is worth roughly the equivalent as a freehold. Where an further 90 years added to any lease with more than 35 years remaining, the property will be equivalent in value to a freehold for decades to come.
| 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. |
| Leeds Building Society | 85 years remaining from the start of the mortgage. |
| National Westminster Bank | Mortgage term plus 30 years. |
| 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. |
| 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 |
Regardless of whether you are a tenant or a freeholder in Totnes,the lease extension lawyers that we work with will always be willing to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Totnes valuers.
In recent months Alex, came precariously close to the 80-year threshold with the lease on his two bedroom apartment in Totnes. In buying his flat two decades ago, the length of the lease was of minimal importance. Fortunately, he recognised he needed to take steps soon on a lease extension. Alex was able to extend his lease at the eleventh hour in September. Alex and the freeholder ultimately agreed on an amount of £6,000 . If he had missed the deadline, the amount would have become more exhorbitant by a minimum £850.
Mr K Edwards owned a one bedroom flat in Totnes in April 2007. We are asked if we could estimate the compensation to the landlord would likely be for a 90 year extension to my lease. Similar premises in Totnes with 100 year plus lease were in the region of £203,200. The average amount of ground rent was £65 invoiced annually. The lease terminated on 14 February 2085. Considering the 61 years remaining we estimated the compensation to the freeholder to extend the lease to be between £19,000 and £22,000 plus legals.
Last month we were e-mailed by Mr and Mrs. V Vincent , who acquired a basement flat in Totnes in October 2012. The dilemma was if we could shed any light on how much (roughly) premium would likely be to prolong the lease by an additional years. Identical premises in Totnes with 100 year plus lease were worth £260,000. The mid-range ground rent payable was £50 billed every twelve months. The lease ran out on 9 February 2096. Given that there were 72 years left we approximated the premium to the landlord to extend the lease to be within £9,500 and £11,000 not including expenses.