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Top reasons for Buckingham lease extension


Why you should start your Buckingham lease extension today:

A Buckingham lease depreciates with the years remaining on the lease.

The market value of a leasehold property in Buckingham is impacted by how many years the lease has left to run. If it is near to or fewer than eighty years you should expect difficulties on re-sale, so it is recommended to arrange for a lease extension ahead of buying. It is ideal to start the lease extension process when a lease still has 82 years unexpired so that formalities can be addressed ahead of the 80 year cut off point. Statute enables Buckingham qualifying lessees to obtain a lease extension of ninety years in addition to the remaining length of the lease at a peppercorn rent (that is, rent free). The purpose of the valuation is to determine the amount payable by the lessee to the freeholder for the acquisition of the lease extension.

Buckingham property with a lease extension has roughly the same value as a freehold

Leasehold properties in Buckingham with in excess of 100 years left on the lease are sometimes referred to as ‘virtual freehold’. This is where the lease is worth the same as a freehold interest in your property. In such situations there is often little upside in buying the reversionary interest unless savings on ground rent and maintenance charges merit it.

Banks and Building Societies will not finance a property on a short lease

Most mortgage companies will not grant a mortgage on a lease with less than 70 years remaining - although this varies from lender to lender. A purchaser will no doubt encounter difficulties in obtaining a mortgage and this could result in your Buckingham property being difficult to dispose of or remortgage.

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.
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.
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.
Halifax Minimum 70 years from the date of the mortgage.
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 Originations (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 Originations (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 Originations):
- 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 Originations (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
- Starting Ground Rent greater than 0.1% of the property value
- Ground Rent review period less than or equal to 5 years
- 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

Refer to Originations (Valuer will consider any impact on valuation figure and marketability):
- Ground Rent is linked to any indices greater than RPI
- Ground Rent is linked to the value of the building*
- 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 Originations):
- 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
- Starting Ground Rent less than or equal to 0.1% of the property value
- Ground Rent review period greater than 5 years
- Ground Rent escalation less than or equal to RPI

* 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

Get in touch with one of our Buckingham lease extension solicitors or enfranchisement solicitors

The conveyancing solicitors that we work with undertake Buckingham 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 conveyancing solicitor we work with provide it.

Buckingham Lease Extension Case Studies:

Luke, Buckingham, Buckinghamshire,

Luke owned a high value apartment in Buckingham being sold with a lease of a little over sixty years unexpired. Luke on an informal basis approached his landlord being a well known Manchester-based freehold company for a lease extension. The freeholder was prepared to agree an extension on non-statutory terms taking the lease to 125 years subject to an increased rent to £50 per annum. No ground rent would be due on a lease extension were Luke to exercise his statutory right. Luke obtained expert advice and secured an acceptable deal without going to tribunal and ending up with a market value flat.

Buckingham case:

Dr Eli Rodríguez acquired a one bedroom apartment in Buckingham in June 1996. We are asked if we could approximate the premium would likely be to extend the lease by ninety years. Identical residencies in Buckingham with a long lease were worth £166,400. The average ground rent payable was £60 billed per annum. The lease expired on 22 January 2075. Considering the 54 years unexpired we estimated the premium to the landlord to extend the lease to be within £32,300 and £37,400 plus legals.

Buckingham case:

Last Christmas we were approach by Dr Jordan Stewart , who took over the lease of a first floor flat in Buckingham in June 1996. We are asked if we could shed any light on how much (roughly) price would likely be to prolong the lease by ninety years. Similar residencies in Buckingham with an extended lease were valued about £227,800. The average ground rent payable was £45 collected annually. The lease lapsed in 2086. Considering the 65 years remaining we approximated the compensation to the landlord for the lease extension to be between £13,300 and £15,400 exclusive of professional charges.