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Why you should commence your Christchurch lease extension


Why you should commence your Christchurch lease extension today:

A Christchurch lease depreciates with the years remaining on the lease.

As the the remaining lease term of a Christchurch residential lease decreases so does its value and therefore the value of your property. Where the lease has, over 100 years remaining then this decrease may be fractional that being said there will become a stage when a lease has less than eighty years left as part of the premium you will incur is what is termed as a marriage value. This could increase sharply the cost. It is the main rational as to why you should extend the lease sooner rather than later. Many flat owners in Christchurch will qualify for this right; that being said a conveyancer will be able to confirm if you are eligible for a lease extension. In limited situations you may not qualify, the most frequent reason being that you have not been the owner of the property for two years.

An extended lease is almost the same value as a freehold

Leasehold premises in Christchurch with over one hundred years remaining 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 premises. In such situations there is often little to be gained by buying the reversionary interest unless savings on ground rent and estate charges justify it.

Banks and Building Societies may not finance a property with a short lease

Lenders do not lend on short residential leases. You are likely to encounter difficulties where you need to sell your flat in Christchurch if the remaining term of your lease is below the criteria set by the majority of lenders. Different mortgage companies have different requirements but on the whole they are looking for a minimum remaining lease term of 65 years.

Lender Requirement
Birmingham Midshires Minimum 70 years from the date of the mortgage.
Halifax Minimum 70 years from the date of the mortgage.
Lloyds TSB Scotland Minimum 70 years from the date of the mortgage.
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
Virgin 85 years at the time of completion. If it's less, we require it to be extended on or before completion.

What makes us experts in Christchurch lease extensions?

The lawyers that we work with handle Christchurch 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.

Christchurch Lease Extension Example Cases:

Tommy, Christchurch, Dorset,

Tommy was the the leasehold proprietor of a studio apartment in Christchurch being marketed with a lease of a little over 72 years unexpired. Tommy on an informal basis spoke with his landlord being a well known London-based freehold company for a lease extension. The landlord was prepared to grant an extension on non-statutory terms taking the lease to 125 years subject to an increased rent to £200 annually. Ordinarily, ground rent would not be due on a lease extension were Tommy to invoke his statutory right. Tommy procured expert legal guidance and was able to make a more informed decision and deal with the matter and ending up with a market value flat.

Christchurch case:

Last Summer we were phoned by Ms Ellen François , who took over the lease of a newly refurbished apartment in Christchurch in August 1996. The dilemma was if we could estimate the premium could be for a ninety year lease extension. Comparable residencies in Christchurch with an extended lease were valued around £265,000. The average ground rent payable was £50 invoiced yearly. The lease elapsed on 28 April 2098. Given that there were 74 years outstanding we calculated the premium to the landlord to extend the lease to be within £9,500 and £11,000 not including expenses.

Christchurch case:

In 2009 we were phoned by Ms Natasha Davies who, having owned a first floor flat in Christchurch in September 1995. We are asked if we could shed any light on how much (approximately) price would likely be for a ninety year lease extension. Comparable properties in Christchurch with a long lease were worth £166,400. The mid-range amount of ground rent was £60 invoiced per annum. The lease concluded on 21 March 2078. Given that there were 54 years outstanding we approximated the compensation to the freeholder to extend the lease to be between £32,300 and £37,400 not including fees.