It’s a harsh certainty that a City Of London residential lease is a deteriorating asset. As the lease term diminishes so does the value of the property. The extent of this is taken for granted in the first few years due to the reduction being disguised by increases in the City Of London property prices.Once your lease gets to 85ish years, you should start considering a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease dips under eighty years - otherwise a higher premium will be due. Most leasehold owners in City Of London will be able to extend under the legislation; however a conveyancer should be able to clarify if you are eligibility. In some cases you may not be entitled. There are also strict timeframes and procedures to follow once the process is initiated and you will need to be guided by your conveyancing solicitor from beginning to end of the formalities.
It is generally accepted that a property with more than 100 years remaining is worth roughly the same as a freehold. Where an further ninety years added to all but the shortest lease, the premises will be equivalent in value to a freehold for decades to come.
| Lender | Requirement |
|---|---|
| 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. |
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage should be declined (see exception below). Leases with greater than 70 years but fewer than 85 years remaining must be referred to issuing office. 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; |
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| National Westminster Bank | Mortgage term plus 30 years. For Shared Ownership, the remaining term of the lease must also be not less than 75 years at the outset of the mortgage. |
Lease extensions in City Of London can be a difficult process. We recommend you get guidance from a conveyancing solicitor and surveyor with experience in lease extensions.
We provide you with an expert from a selection of lease extension solicitors, which ensures a targeted and efficient service as you have a dedicated port of call with an individual lawyer. Our lease extension solicitors have a wealth of experience dealing with City Of London lease extensions and further afield, as well as any potential issues which may arise as well as problems with the Leasehold Valuation Tribunal.
Samuel owned a high value apartment in City Of London on the market with a lease of a little over 61 years outstanding. Samuel informally spoke with his freeholder being a well known local-based freehold company and enquired on a premium to extend the lease. The freeholder indicated a willingness to grant an extension taking the lease to 125 years subject to a rise in the rent to £50 annually. No ground rent would be due on a lease extension were Samuel to exercise his statutory right. Samuel obtained expert legal guidance and was able to make a more informed judgement and handle with the matter and sell the flat.
Ms Charlotte Leroy moved into a first floor apartment in City Of London in October 2005. The question was if we could approximate the price would likely be to extend the lease by ninety years. Similar homes in City Of London with 100 year plus lease were valued about £223,400. The average amount of ground rent was £60 collected every twelve months. The lease expired in 2084. Having 59 years outstanding we calculated the premium to the landlord for the lease extension to be within £27,600 and £31,800 exclusive of costs.
Last Christmas we were phoned by Mr B Martinez , who acquired a ground floor flat in City Of London in July 2005. We are asked if we could approximate the premium could be to extend the lease by an additional years. Comparative premises in City Of London with an extended lease were valued around £205,000. The average ground rent payable was £50 invoiced annually. The lease elapsed on 9 May 2104. Having 79 years as a residual term we estimated the compensation to the landlord to extend the lease to be within £8,600 and £9,800 exclusive of fees.