City Of London leases on residential properties are gradually losing 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 City Of London tenants have the right to extend their lease by an additional 90 years by virtue of the 1993 Leasehold Reform Act. Where you are a leasehold owner in City Of London you would be well advised to investigate if your lease has between 70 and ninety years remaining. In particular once the remaining lease term slips under eighty years, the compensation to the landlord for any lease extension increases dramatically as an element of the premium you pay is what is known as a marriage value
It is generally considered that a property with in excess of one hundred years unexpired lease term is worth approximately the equivalent as a freehold. Where an further 90 years added to all but the shortest lease, the premises will be equivalent in value to a freehold for many years ahead.
| Lender | Requirement |
|---|---|
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage are not acceptable. Leases with fewer than 70 years should only be referred to the issuing office where the following scenario applies, as discretion may be applied subject to bank approval: • Property is located in any of the following prestigious developments: Cadogan, Crown, Grosvenor, Howard de Walden, Portman or Wellcome Trust Estates in Central London AND • The value of the property subject to the short remaining term is £500,000 or more AND • The loan to value does not exceed 90% for purchases, 90% like for like re-mortgages, 80% for re-mortgages with any element of capital raising and 80% for existing Barclays mortgage borrowers applying for additional borrowing; |
| Barnsley Building Society | 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term. |
| 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. |
| National Westminster Bank | Mortgage term plus 30 years. For Shared Ownership, the remaining term of the lease must be at least 30 years plus the term of the mortgage at the outset of the mortgage. |
| 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 undertake City Of London 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.
Finley owned a studio flat in City Of London on the market with a lease of a few days over 72 years remaining. Finley on an informal basis contacted his freeholder a well known local-based freehold company for a lease extension. The landlord was prepared 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 £150 per annum and increase every twenty five years thereafter. Ordinarily, ground rent would not be due on a lease extension were Finley to invoke his statutory right. Finley obtained expert legal guidance and was able to make a more informed judgement and handle with the matter and ending up with a market value flat.
Last Summer we were phoned by Dr Omar Alexander , who completed a one bedroom flat in City Of London in October 2000. We are asked if we could estimate the premium could be to prolong the lease by an additional years. Comparative properties in City Of London with an extended lease were in the region of £290,000. The mid-range ground rent payable was £45 invoiced monthly. The lease expired on 8 September 2099. Taking into account 73 years left we calculated the premium to the freeholder to extend the lease to be between £9,500 and £11,000 exclusive of professional charges.
In 2010 we were e-mailed by Mr and Mrs. D Ramírez who, having moved into a basement apartment in City Of London in January 1998. The question was if we could shed any light on how much (roughly) price could be for a 90 year lease extension. Comparable residencies in City Of London with an extended lease were valued around £240,600. The average ground rent payable was £60 collected annually. The lease ran out in 2088. Having 62 years remaining we approximated the compensation to the freeholder to extend the lease to be between £21,900 and £25,200 plus fees.