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Why you should commence your Ditchling lease extension


Top reasons for lease extension now:

Increase your lease and increase your Ditchling property value

Ditchling leases on domestic deteriorating in value. if your lease has about ninety years unexpired, you should start considering the need for a lease extension. It is important to recognise that it is that it is financially advisable for a lease extension to take place before the term of the existing lease falls below eighty years - otherwise a higher premium will be payable. Leasehold owners in Ditchling will mostly be legally entitled to a lease extension; however a solicitor should be able check your eligibility. In some cases you may not be entitled. There are prescribed deadlines and formalities to follow once the process is triggered so it’s sensible to be guided by a conveyancer during the process.

Ditchling property with a lease extension has roughly the same value as a freehold

It is conventional wisdom that a residential leasehold with more than 100 years unexpired lease term is worth approximately the equivalent as a freehold. Where an further 90 years added to any lease with more than 35 years unexpired, the property will be equivalent in value to a freehold for decades to come.

Banks and Building Societies may decide not to loan monies with a short lease

Mortgage lenders have set criteria when lending funds secured on leasehold property. Some will simply refrain from lending at all once the remaining lease term slips beneath a specified unexpired lease term. Many Lending institutions will not consider property with an unexpired term of less than seventy years suitable security. As well as this being important when selling, it is also relevant if you are intending to refinance your Ditchling home.

Lender Requirement
Bank of Scotland Minimum 70 years from the date of the mortgage.
Barclays plc Mortgage term plus 25 years provided that leases of less than 85 years are be referred to us for approval.
Leeds Building Society 85 years remaing from the start of the mortgage.
Nationwide Building Society - Our minimum unexpired lease term is 55 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

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
- 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 0.5% 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 (does not apply to Shared Ownership)
- Starting Ground Rent greater than 0.1% of the property value
- Ground Rent review period less than or equal to every 5 years
- 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

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
- Ground Rent is linked to any indices greater than RPI
- Ground Rent is linked to the value of the building*
- 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 0.5% 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
- Starting Ground Rent less than or equal to 0.1% of the property value
- Ground Rent review period greater than 5 years
- Ground Rent escalation less than or equal to RPI

* 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.
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.

Get in touch with one of our Ditchling lease extension solicitors or enfranchisement solicitors

Irrespective of whether you are a tenant or a landlord in Ditchling,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 Ditchling valuers.

Ditchling Lease Extension Example Cases:

Isaac, Ditchling, East Sussex,

Isaac owned a studio apartment in Ditchling being sold with a lease of a few days over 72 years outstanding. Isaac on an informal basis approached his freeholder a well known local-based freehold company and enquired on a premium to extend the lease. The landlord was prepared to agree an extension on non-statutory terms taking the lease to 125 years on the basis of a new rent at the outset set at £200 per annum and increase every 25 years thereafter. Ordinarily, ground rent would not be payable on a lease extension were Isaac to invoke his statutory right. Isaac procured expert legal guidance and was able to make a more informed decision and deal with the matter and readily saleable.

Ditchling case:

Last month we were e-mailed by Mr and Mrs. G González , who acquired a studio flat in Ditchling in May 2003. The dilemma was if we could estimate the compensation to the landlord would likely be to prolong the lease by a further 90 years. Comparative homes in Ditchling with an extended lease were worth £200,800. The average amount of ground rent was £65 billed quarterly. The lease termination date was on 23 January 2082. Taking into account 60 years unexpired we calculated the compensation to the freeholder for the lease extension to be within £20,900 and £24,200 not including fees.

Ditchling case:

Last month we were approach by Mrs R Roux , who purchased a purpose-built flat in Ditchling in June 2012. We are asked if we could approximate the price would likely be to extend the lease by a further 90 years. Comparable homes in Ditchling with a long lease were valued around £255,000. The average ground rent payable was £50 collected quarterly. The lease finished on 17 June 2093. Having 71 years left we approximated the premium to the landlord for the lease extension to be within £9,500 and £11,000 exclusive of professional charges.