Owning a flat usually means owning a lease of the property, this is a ‘time-limited’ interest becoming shorter every day. your lease will ordinarily be granted for a fixed period of time , usually 99 or 125 years, although we have witnessed longer and shorter terms in Charmouth. Clearly, the term of lease remaining shortens as time goes by. This may slip by relatively unnoticed when the flat or house has to be sold or refinanced. The fewer the years remaining the lower the value of the property and the more expensive it will be to procure a lease extension. Eligible long lease owners in Charmouth have the right to extend the lease for an additional ninety years under the 1993 Leasehold Reform Act. Please give due attention before delaying your Charmouth lease extension. Putting off the cost now simply increases the price you will ultimately have to pay to extend your lease
Leasehold premises in Charmouth with in excess of one hundred years outstanding on the lease are often referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your property. In such circumstances there is often little to be gained by buying the reversionary interest unless savings on ground rent and maintenance charges merit it.
| Lender | Requirement |
|---|---|
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| 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. |
| Halifax | Minimum 70 years from the date 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 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 |
Irrespective of whether you are a tenant or a landlord in Charmouth,the lease extension experts 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 Charmouth valuers.
Toby owned a 2 bedroom flat in Charmouth being sold with a lease of a few days over 59 years left. Toby on an informal basis approached his landlord being a well known local-based freehold company for a lease extension. The landlord indicated a willingness to extend the lease to 125 years on the basis of a new rent at the outset set at £200 per annum and doubled every twenty five years thereafter. No ground rent would be due on a lease extension were Toby to invoke his statutory right. Toby procured expert advice and was able to make an informed decision and handle with the matter and sell the flat.
Last Spring we were called by Dr N Brooks , who took over the lease of a basement flat in Charmouth in April 2001. We are asked if we could shed any light on how much (roughly) price could be for a 90 year lease extension. Comparative flats in Charmouth with a long lease were valued around £171,800. The average ground rent payable was £55 billed every twelve months. The lease ended in 2074. Given that there were 50 years as a residual term we approximated the compensation to the landlord to extend the lease to be between £33,300 and £38,400 exclusive of legals.
In 2011 we were contacted by Mr and Mrs. T Scott who, having bought a ground floor flat in Charmouth in November 2003. The dilemma was if we could estimate the compensation to the landlord would likely be for a ninety year extension to my lease. Similar flats in Charmouth with a long lease were valued about £280,000. The mid-range ground rent payable was £45 billed yearly. The lease lapsed in 2094. Given that there were 70 years outstanding we estimated the premium to the freeholder for the lease extension to be between £12,400 and £14,200 not including costs.