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Top reasons for Fowey lease extension


Why you should start your Fowey lease extension today:

A Fowey lease depreciates with the years remaining on the lease.

Unfortunately that a Fowey residential lease is a wasting asset. As the lease term reduces so does the value of the property. The extent of this is taken for granted in the first few years due to the deflation being disguised by increases in the Fowey property prices.Where your lease has approximately 90 years left, 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 slips under 80 years - otherwise a higher amount will be due. The majority of leasehold owners in Fowey will be able to extend under the legislation; however a conveyancing solicitor should be able to confirm if you are eligibility. In some situations you may not be entitled. There are also strict deadlines and procedures to follow once the process is instigated and you will need to be guided by your lawyer for the duration of the process.

Fowey property with a lease extension is almost the same value as a freehold

Leasehold premises in Fowey with more than 100 years remaining on the lease are often regarded as a ‘virtual freehold’. This is where the lease value the same as a freehold interest in your premises. In such circumstances there is often little to be gained by buying the reversionary interest unless savings on ground rent and maintenance charges warrant it.

Banks and Building Societies may decide not to issue a mortgage on a short lease

Lenders are tightening their criteria and a meaningful number now require flats to have at least 60 if not 70 years remaining once the mortgage has expired. Given that plenty of flats in Fowey were created in the 1950s, 1960s and 1970s this means many now require lease extensions if they if they are to be mortgageable.

Lender Requirement
Bank of Scotland Minimum 70 years from the date of the mortgage.
Barnsley Building Society 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
Lloyds TSB Scotland Minimum 70 years from the date of the mortgage.
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
The Mortgage Works Minimum unexpired lease term is 70 years with 30 years remaining at the end of the mortgage term.
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 70 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 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 70 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 1.0% 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
- 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 reviewed and altered on any review basis or methodology

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 1.0% 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 you become aware that it does not meet these requirements, please refer to the Issuing Office

Why use us for your lease extension in Fowey?

Retaining our service gives you enhanced control over the value of your Fowey leasehold, as your property will be more valuable and saleable in relation to the lease length should you want to sell. The conveyancing solicitors that we work with have a wealth of experience of handling many hundreds of lease extensions or freehold purchase transactions.

Fowey Lease Extension Example Cases:

Andrew, Fowey, Cornwall,

Andrew owned a 2 bedroom flat in Fowey on the market with a lease of a little over 72 years left. Andrew on an informal basis contacted his freeholder being a well known London-based freehold company and enquired on a premium to extend the lease. The freeholder was keen to agree an extension on non-statutory terms taking the lease to 125 years subject to a new rent initially set at £200 per annum and increase every 25 years thereafter. Ordinarily, ground rent would not be due on a lease extension were Andrew to exercise his statutory right. Andrew procured expert legal guidance and was able to make an informed judgement and deal with the matter and ending up with a market value flat.

Fowey case:

Last Winter we were phoned by Mr and Mrs. L Nelson , who took over the lease of a purpose-built flat in Fowey in March 2006. The dilemma was if we could approximate the price would likely be for a 90 year extension to my lease. Comparative homes in Fowey with 100 year plus lease were valued about £290,000. The average amount of ground rent was £55 billed annually. The lease termination date was in 2104. Having 80 years unexpired we estimated the premium to the freeholder for the lease extension to be between £12,400 and £14,200 exclusive of fees.

Fowey case:

Last Autumn we were approach by Mr and Mrs. T Laurent , who purchased a one bedroom apartment in Fowey in February 2007. The question was if we could estimate the price would be to extend the lease by 90 years. Comparative flats in Fowey with a long lease were in the region of £200,800. The mid-range amount of ground rent was £65 collected yearly. The lease lapsed in 2084. Given that there were 60 years outstanding we estimated the compensation to the landlord to extend the lease to be between £20,900 and £24,200 not including costs.