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Main reasons to commence your Cardiff Bay lease extension


Main reasons to commence your Cardiff Bay lease extension today:

A Cardiff Bay lease depreciates with the years remaining on the lease.

Cardiff Bay leases on residential properties are gradually diminishing in value. The shorter the remaining lease term becomes, the less it is worth – and accordingly any extension of the lease becomes more expensive. Legislation has been in place for sometime now allowing qualifying Cardiff Bay residential leaseholders to extend the terms of long leases. Where you are a leasehold owner in Cardiff Bay you really ought to investigate if your lease has between seventy and ninety years left. In particular once the remaining lease term slips under 80 years, the cost of any lease extension increases dramatically as part of the premium you will incur is what is known as a marriage value

An extended lease is almost the same value as a freehold

Leasehold residencies in Cardiff Bay with more than 100 years outstanding on the lease are sometimes regarded as a ‘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 estate charges warrant it.

Mortgage lenders may decide not to lend on a short lease

Almost all banks and building societies insist on a lengthy amount of time left on a leasehold residence before they will contemplate it as adequate security. Even if you don't require a mortgage, you should be aware that it is likely that someone wishing to acquire your property in the future might well do, so if they are unable to obtain a mortgage, then the financial worth of the property will likely suffer. In the last decade many mortgage lenders have increased the required minimum lease length that they are prepared to grant a mortgage 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.
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.
Lloyds TSB Scotland Minimum 70 years from the date of the mortgage.
Nationwide Building Society - Our minimum unexpired lease term is 55 years, except where lending is over 85% of the purchase price/valuation on a second hand flat, in which case our minimum unexpired term is 90 years.
- There must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start).

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
- Where lending is over 85% of the purchase price/valuation on a second hand flat and the unexpired lease term on the offer is 90 years or more - only advise us if the actual lease term is less than 90 years.

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 55 years
- Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat
- 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 is 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 55 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% 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 (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat)
- 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 (does not apply to Shared Ownership)
- 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 charged which is more than on a peppercorn basis

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% 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 Issuing Office.
TSB Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption.

What makes us experts in Cardiff Bay lease extensions?

Irrespective of whether you are a tenant or a freeholder in Cardiff Bay,the lease extension solicitors 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 Cardiff Bay valuers.

Cardiff Bay Lease Extension Case Studies:

Jacob, Cardiff Bay, Cardiff

Two years ago Jacob, came dangerously close to the 80-year threshold with the lease on his basement flat in Cardiff Bay. Having bought his home 19 years ago, the length of the lease was of no concern. Fortunately, he became aware that he needed to take steps soon on a lease extension. Jacob arranged for a lease extension just under the wire last June. Jacob and the landlord eventually agreed on the final figure of £5,000 . If the lease had gone to less than eighty years, the figure would have become more costly by at least £950.

Cardiff Bay case:

Last January we were approach by Mr and Mrs. O Baker , who moved into a basement flat in Cardiff Bay in July 1996. The question was if we could shed any light on how much (approximately) premium would be to prolong the lease by an additional years. Comparative properties in Cardiff Bay with an extended lease were in the region of £280,000. The average amount of ground rent was £55 invoiced every twelve months. The lease lapsed in 2102. Having 78 years unexpired we approximated the compensation to the freeholder for the lease extension to be within £13,300 and £15,400 not including expenses.

Cardiff Bay case:

Last Spring we were approach by Dr Eliot Martinez , who took over the lease of a one bedroom apartment in Cardiff Bay in February 2006. We are asked if we could shed any light on how much (approximately) premium could be for a 90 year lease extension. Identical premises in Cardiff Bay with an extended lease were worth £191,000. The average amount of ground rent was £65 collected monthly. The lease elapsed in 2082. Taking into account 58 years outstanding we estimated the compensation to the landlord for the lease extension to be between £23,800 and £27,400 plus legals.