Chinatown 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 your lease gets more expensive. Legislation has been in place for sometime now allowing qualifying Chinatown residential leaseholders to extend the terms of long leases. Where you are a leasehold owner in Chinatown you really ought to see if your lease has between seventy and ninety years left. There are good reasons why a Chinatown leaseholder with a lease having around 80 years remaining should take action to make sure that a lease extension is effected without delay
Leasehold premises in Chinatown with more than 100 years unexpired 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 freehold unless savings on ground rent and maintenance charges warrant it.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| Coventry Building Society | 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. |
| TSB | Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption. |
| Yorkshire 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. |
The conveyancing solicitors that we work with handle Chinatown 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 lawyer we work with provide it.
Archie owned a 2 bedroom apartment in Chinatown being marketed with a lease of a few days over sixty years remaining. Archie informally contacted his freeholder being a well known Manchester-based freehold company and enquired on a premium to extend the lease. The landlord was keen to give an extension on non-statutory terms taking the lease to 125 years on the basis of a new rent to start with set at £100 per annum and increase every 25 years thereafter. Ordinarily, ground rent would not be payable on a lease extension were Archie to exercise his statutory right. Archie procured expert advice and secured satisfactory resolution informally and readily saleable.
In 2012 we were called by Dr Caleb Clark who, having acquired a purpose-built apartment in Chinatown in May 2001. We are asked if we could estimate the compensation to the landlord could be to extend the lease by ninety years. Comparative homes in Chinatown with 100 year plus lease were in the region of £223,400. The average amount of ground rent was £60 billed monthly. The lease terminated on 20 May 2085. Taking into account 59 years outstanding we estimated the compensation to the landlord for the lease extension to be within £27,600 and £31,800 exclusive of costs.
An example of a Freehold Enfranchisement matter before the tribunal for a Chinatown property is 36 New Wanstead in August 2010. The Tribunal arrived at a valuation of the premium for the freehold of £22,359. This case affected 2 flats. The unexpired lease term was 73.92 years.