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Why you should start your Bideford lease extension


Top reasons for lease extension now:

Increase your lease and increase your Bideford property value

Unfortunately that a Bideford residential lease is a deteriorating asset. As the lease term diminishes so does the value of the property. The extent of this is taken for granted in the first few years due to the loss of value being disguised by increases in the Bideford property market.Where your lease has approximately ninety years left, you should start thinking about a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease dips below 80 years - otherwise a higher premium will be due. Most flat owners in Bideford will be able to extend under the legislation; however a conveyancing solicitor will be able to clarify if you are eligibility. In some cases you may not qualify. There are also strict timeframes and procedures to follow once the process is instigated and you will need to be guided by your conveyancer for the duration of the formalities.

An extended lease has roughly the same value as a freehold

It is conventional wisdom that a property with more than one hundred years remaining is worth approximately the equivalent as a freehold. Where an further ninety years added to any lease with more than 35 years unexpired, the property will be worth the same as a freehold for decades to come.

Mortgage lenders may decide not to grant a mortgage on a short lease

Nearly all mortgage lenders will not grant a mortgage on a lease with under seventy years unexpired - although this varies from lender to lender. A purchaser will undoubtedly encounter difficulties to obtain a mortgage and this could result in your Bideford property being difficult to dispose of or to obtain finance on.

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.
Birmingham Midshires Minimum 70 years from the date of the mortgage.
Leeds Building Society 85 years remaing from the start of the mortgage.
TSB Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption.
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 0.5% 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 0.5% 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

Why use us for your lease extension in Bideford?

Using our service will provide you better control over the value of your Bideford leasehold, as your property will be more valuable and marketable in relation to the lease length should you wish to sell. The conveyancing solicitors that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.

Bideford Lease Extension Example Cases:

Oliver, Bideford, Devon

Last Winter Oliver, started to get near to the 80-year threshold with the lease on his basement flat in Bideford. Having bought his home twenty years previously, the unexpired term was of minimal bearing. Luckily, he noticed he would soon be paying an inflated amount for Extending the lease. Oliver extended the lease just in the nick of time in January. Oliver and the freeholder via the management company eventually agreed on an amount of £6,000 . If he not met the deadline, the premium would have gone up by a minimum £850.

Bideford case:

In 2009 we were e-mailed by Mr I Sharif who, having took over the lease of a ground floor flat in Bideford in March 2008. We are asked if we could shed any light on how much (approximately) premium could be to prolong the lease by ninety years. Similar properties in Bideford with 100 year plus lease were valued about £257,800. The mid-range ground rent payable was £65 invoiced annually. The lease lapsed on 28 June 2087. Taking into account 65 years as a residual term we calculated the compensation to the landlord for the lease extension to be between £18,100 and £20,800 plus professional charges.

Bideford case:

Last Winter we were called by Mr and Mrs. W Watson , who was assigned a lease of a ground floor apartment in Bideford in November 2003. The question was if we could estimate the compensation to the landlord would be for a ninety year lease extension. Identical premises in Bideford with a long lease were worth £191,400. The mid-range amount of ground rent was £55 invoiced every twelve months. The lease ran out in 2076. Having 54 years as a residual term we approximated the compensation to the landlord for the lease extension to be between £34,200 and £39,600 plus professional charges.