The market value of a leasehold property in Cirencester is impacted by how long the lease has left to run. If it is close to or less than 80 years you should anticipate difficulties on re-sale, so it is advisable to arrange for the lease to be extended before purchasing. It is preferable to commence the process of extending the lease is when the lease still has 82 years to run so that formalities can be addressed ahead of the eighty year threshold. Leasehold Reform legislation entitles Cirencester qualifying lessees to acquire a new lease which will be for the current unexpired lease term plus an additional term of 90 years. The purpose of the valuation is to determine the premium payable by the lessee to the freeholder for the purchase of the lease extension.
It is conventional wisdom that a property with more than one hundred years unexpired lease term is worth roughly the equivalent as a freehold. Where an further 90 years added to any lease with more than 30 years unexpired, the premises will be worth the same as a freehold for decades to come.
| Lender | Requirement |
|---|---|
| Bank of Scotland | 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 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. |
Retaining our service gives you better control over the value of your Cirencester leasehold, as your property will be more valuable and saleable in respect of lease length should you want to sell. The lawyers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
Finley owned a 2 bedroom flat in Cirencester on the market with a lease of a few days over fifty eight years left. Finley informally contacted his freeholder being a well known Manchester-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 a rise in the rent to £100 annually. Ordinarily, ground rent would not be due on a lease extension were Finley to invoke his statutory right. Finley procured expert legal guidance and was able to make an informed judgement and handle with the matter and ending up with a market value flat.
Dr V Kelly acquired a basement flat in Cirencester in March 2004. The dilemma was if we could estimate the price would likely be for a ninety year extension to my lease. Identical flats in Cirencester with an extended lease were in the region of £246,800. The average ground rent payable was £60 invoiced annually. The lease expired on 25 August 2076. Considering the 50 years remaining we approximated the premium to the landlord to extend the lease to be between £44,700 and £51,600 plus costs.
In 2009 we were approached by Dr Jayden Bennett who, having took over the lease of a studio apartment in Cirencester in November 1997. The question was if we could estimate the premium would be to extend the lease by a further 90 years. Identical premises in Cirencester with an extended lease were valued around £203,200. The mid-range ground rent payable was £65 invoiced per annum. The lease lapsed on 19 May 2087. Having 61 years as a residual term we calculated the compensation to the landlord for the lease extension to be between £19,000 and £22,000 exclusive of professional charges.