If you are facing a significant premium because your lease in Cotswolds 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.
Main reasons to commence your Cotswolds lease extension today:
Increase your lease and increase your Cotswolds property value
The market value of a leasehold property in Cotswolds depends on how many years the lease has left to run. If it is near to or fewer than eighty years you should expect problems on re-sale, so it is advisable to arrange for a lease extension prior to purchasing. Ideally one should start the process of extending the lease is when a lease still has 82 years remaining so that all matters can be concluded well before the eighty year mark. Statute entitles Cotswolds qualifying lessees to obtain a new lease which will be for the current unexpired lease term plus an additional term of ninety years. The intention of the valuation is to arrive at an opinion of the sum payable by the lessee to the freeholder for the purchase of the lease extension.
Cotswolds property with a lease extension is almost the same value as a freehold
It is conventional wisdom that a residential leasehold with more than one hundred years remaining is worth approximately the equivalent as a freehold. Where an additional ninety years added to all but the shortest lease, the premises will be worth the same as a freehold for decades to come.
Lending institutions may not grant a mortgage with a short lease
The trend since 2008 has been for banks to tighten lending criteria across the board - this has extended to the property over which the mortgage is to be charged. This has resulted in the minimum number of years remaining under the lease required by banks has increased. Historically mortgage companies were content with 25 years plus the term of the loan - typically 50 year leases but those requirements have been chipped away by the requirement for longer and longer leases - many use a minimum term of 75 years as standard.
| Lender |
Requirement
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|---|
| Birmingham Midshires |
Minimum 70 years from the date of the mortgage.
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| Halifax |
Minimum 70 years from the date of the mortgage.
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| Leeds Building Society |
85 years remaining from the start of the mortgage.
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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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| Skipton Building Society |
85 years from the date of completion of the mortgage
For Buy to Let cases:
- lettings must not breach any of the lessee’s covenants; and
- consent of the lessor to lettings must be obtained if necessary
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Get in touch with one of our Cotswolds lease extension solicitors or enfranchisement solicitors
Irrespective of whether you are a tenant or a freeholder in Cotswolds,the lease extension solicitors that we work with will always be happy to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Cotswolds valuers.
Cotswolds Lease Extension Example Cases:
Bethan, Cotswolds, Gloucestershire,
Following lengthy discussions with the landlord of her one bedroom flat in Cotswolds, Bethan started the lease extension process as the eighty year threshold was rapidly approaching. The lease extension was concluded in November 2006. The freeholder’s costs were kept to an absolute minimum.
Cotswolds case:
Mr and Mrs. W Jackson owned a one bedroom apartment in Cotswolds in October 2006. The question was if we could approximate the compensation to the landlord would be for a 90 year extension to my lease. Similar properties in Cotswolds with 100 year plus lease were worth £285,000. The mid-range amount of ground rent was £55 invoiced monthly. The lease concluded on 4 August 2105. Taking into account 79 years outstanding we calculated the compensation to the landlord to extend the lease to be between £13,300 and £15,400 plus costs.
Cotswolds case:
Mr S Girard acquired a newly refurbished flat in Cotswolds in August 2001. The question was if we could estimate the price would likely be to prolong the lease by ninety years. Similar properties in Cotswolds with 100 year plus lease were valued about £193,400. The average amount of ground rent was £65 collected yearly. The lease elapsed in 2085. Taking into account 59 years as a residual term we calculated the compensation to the freeholder for the lease extension to be between £21,900 and £25,200 not including costs.