If you are facing a significant premium because your lease in Chinatown has dropped toward the 80-year mark, your previous lawyer may be at fault. Our panel of experts specialise in recovering lease extension costs from negligent firms who failed to protect your investment.
Top reasons for lease extension now:
A Chinatown lease depreciates with the years remaining on the lease.
As the the remaining lease term of a Chinatown domestic lease diminished so does its value and therefore the value of your property. If the lease has, over 99 years remaining then this decrease may be of little impact nevertheless there will become a point in time when a lease has less than 80 years unexpired as part of the premium you will incur is what is termed as a marriage value. This could be significant. It is the primary logic behind why you should extend the lease sooner than later. Most flat owners in Chinatown will qualify for this right; however a conveyancer should be able to confirm if you are eligible to extend your lease. In limited situations you may not qualify, the most frequent reason being that you have owned the property for under two years.
An extended lease is almost the same value as a freehold
It is generally considered that a property with over one hundred years unexpired lease term is worth roughly the same as a freehold. Where an additional ninety years added to any lease with more than 30 years unexpired, the residence will be worth the same as a freehold for many years ahead.
Lending institutions will not issue a mortgage on a short lease
Most mortgage lenders have tightened lending criteria in the last ten years and borrowers are encountering difficulties in arranging funding or re-mortgage against flats with shorter lease terms, particularly below seventy years as they are deemed to be unacceptable security.
| Lender |
Requirement
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| Birmingham Midshires |
Minimum 70 years from the date of the mortgage.
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| 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.
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| 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.
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| 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 a proposed Lease Extension does not meet these requirements, however you feel that this is in the best interest for our mutual client, please refer all details to the Issuing Office for us to consider.
Please ensure that all lender enquiries are submitted (with full documentation/requirements) at least 2 weeks prior to exchange to allow sufficient time for review and decisioning.
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| Royal Bank of Scotland |
Mortgage term plus 30 years.
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Get in touch with one of our Chinatown lease extension solicitors or enfranchisement solicitors
The conveyancers that we work with undertake 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 conveyancer we work with provide it.
Chinatown Lease Extension Case Studies:
Ali, Chinatown, London
In 2014 Ali, came critically near to the 80-year threshold with the lease on his leasehold flat in Chinatown. Having bought his home two decades ago, the length of the lease was of little relevance. Luckily, he became aware that he would soon be paying way over the odds for a lease extension. Ali extended the lease at the eleventh hour in March. Ali and the landlord who owned the flat above ultimately settled on sum of £5,000 . If the lease had slipped below eighty years, the premium would have escalated by a minimum £900.
Chinatown case:
In 2014 we were called by Mrs Amy Pérez who, having was assigned a lease of a first floor apartment in Chinatown in November 2005. The question was if we could estimate the price could be for a 90 year lease extension. Similar properties in Chinatown with an extended lease were valued around £250,400. The mid-range amount of ground rent was £65 billed annually. The lease ran out on 24 August 2090. Given that there were 64 years as a residual term we calculated the compensation to the landlord to extend the lease to be between £19,000 and £22,000 not including legals.
Decision in Redbridge
An example of a Freehold Enfranchisement case 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 was in relation to 2 flats. The remaining number of years on the lease was 73.92 years.