East London leases on residential properties are gradually decreasing in value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of the lease gets more expensive. Most owners of residential leasehold property in East London enjoy rights under legislation to extend the terms of their leases. Where you are a leasehold owner in East London you must check if your lease has between 70 and 90 years remaining. In particular once the remaining lease term slips under 80 years, the compensation to the landlord for any lease extension sharply increases as an element of the premium you will incur is what is known as a marriage value
It is conventional wisdom that a property with over 100 years remaining is worth approximately the same as a freehold. Where an additional ninety years added to all but the shortest lease, the property will be worth the same as 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. |
| Coventry Building Society | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| Godiva Mortgages | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| Santander | You must report the unexpired lease term to us and await our instructions if: 1. the unexpired term assumed by our valuer is between 55 and 82 years, but the actual unexpired term differs by more than one year (whether longer or shorter); or 2. the unexpired term assumed by our valuer is more than 82 years but the actual unexpired term is less than 82 years; or 3. no valuation report is provided However, we will not accept a lease where on expiry of the mortgage: (i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or (ii) less than 30 years remain and the loan is repaid on a capital and interest basis We will accept a lease that has been extended under the provisions of the Leasehold Reform Act 1993 provided statutory compensation would be available to the leaseholder. |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
The conveyancers that we work with handle East 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 conveyancer we work with provide it.
18 months ago Liam, came precariously near to the 80-year mark with the lease on his basement flat in East London. In buying his property two decades ago, the unexpired term was of no bearing. Fortunately, he recognised he would soon be paying way over the odds for Extending the lease. Liam was able to extend his lease at the eleventh hour last January. Liam and the freeholder eventually agreed on the final figure of £5,000 . If the lease had descended lower than 80 years, the premium would have increased by a minimum £1,100.
Last May we were phoned by Mrs Erin Gunderson , who completed a garden flat in East London in October 2011. We are asked if we could approximate the price could be for a ninety year lease extension. Identical residencies in East London with 100 year plus lease were in the region of £193,400. The mid-range ground rent payable was £65 invoiced annually. The lease came to a finish on 12 November 2084. Taking into account 59 years remaining we estimated the compensation to the landlord for the lease extension to be within £21,900 and £25,200 not including fees.
An example of a Freehold Enfranchisement matter before the tribunal for a East London premises is 20 Avonwick Road in July 2013. The Tribunal was dealing with an application under Section 26 of the Leasehold Reform Housing and Urban Development Act 1993 for a determination of the freehold value of the property. It was concluded that the price to be paid was Fifteen Thousand Nine Hundred and Seventy (£15,970) divided as to £8,200 for Flat 20 and £7,770 for Flat 20A This case was in relation to 1 flat. The unexpired term as at the valuation date was 73.26 years.