Chinatown leases on residential properties are gradually decreasing in value. The shorter the remaining lease term becomes, the less it is worth – and accordingly any extension of the lease gets more expensive. It is the case that most Chinatown tenants have the right to extend their lease by an additional ninety years under the 1993 Leasehold Reform Act. Where you are a leasehold owner in Chinatown you would be well advised to see if your lease has between seventy and 90 years left. In particular once the remaining lease term slips under 80 years, the amount payable for any lease extension increases dramatically as an element of the premium you pay is what is known as a marriage value
Leasehold residencies in Chinatown with in excess of 100 years outstanding on the lease are often regarded as a ‘virtual freehold’. This is where the lease value 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 estate charges merit it.
|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.|
|Birmingham Midshires|| Minimum 70 years from the date of the mortgage.|
|Lloyds TSB Scotland|| Mortgage term plus 30 years subject to an overall minimum term of 70 years|
|Royal Bank of Scotland||Mortgage term plus 30 years. For a Lifetime Mortgage, the term must be no less than 150 years minus the age of the Borrower.|
|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 conveyancers 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 conveyancing solicitor we work with provide it.
Two years ago Austin, came perilously near to the eighty-year mark with the lease on his purpose- built apartment in Chinatown. Having bought his flat twenty years ago, the lease term was of no interest. Luckily, he recognised he would imminently be paying an escalated premium for Extending the lease. Austin extended the lease at the eleventh hour last January. Austin and the landlord who owned the flat above eventually agreed on sum of £6,000 . If he failed to meet the deadline, the sum would have increased by at least £900.
Mr G Adams took over the lease of a one bedroom flat in Chinatown in February 2002. The question was if we could approximate the premium could be to prolong the lease by an additional years. Identical residencies in Chinatown with 100 year plus lease were worth £233,200. The average amount of ground rent was £60 collected quarterly. The lease ran out in 2082. Having 61 years outstanding we approximated the premium to the freeholder for the lease extension to be within £22,800 and £26,400 not including professional charges.
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 term was 73.92 years.