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Why you should start your Lydney lease extension


Why you should commence your Lydney lease extension today:

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

The only way is down when it comes to Lydney lease terms. Lydney properties that have a remaining term fewer than 80 years will drop in market price at a rapid rate, and the cost to extend your lease will increase.

An extended lease is almost the same value as a freehold

Leasehold properties in Lydney with over 100 years remaining on the lease are sometimes referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your premises. In such situations there is often little to be gained by purchasing the freehold unless savings on ground rent and service charges justify it.

Lending institutions may not lend with a short lease

Most banks have narrowed their lending criteria in recent years and borrowers are encountering difficulties in arranging funding or re-mortgage against flats with shorter lease terms, particularly under 75 years as they are regarded as unacceptable security.

Lender Requirement
Barclays plc Mortgage term plus 25 years provided that leases of less than 85 years are be referred to us for approval.
Chelsea 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.
Leeds Building Society 85 years remaing from the start of the mortgage.
National Westminster Bank Mortgage term plus 30 years. For a Lifetime Mortgage, the term must be no less than 150 years minus the age of the Borrower.
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 Originations (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 Originations (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 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 Originations):
- 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 Originations (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
- Starting Ground Rent greater than 0.1% of the property value
- Ground Rent review period less than or equal to 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 Originations (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 Originations):
- 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

What makes us experts in Lydney lease extensions?

The conveyancing solicitors that we work with handle Lydney 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 conveyancing solicitor we work with provide it.

Lydney Lease Extension Example Cases:

Alex, Lydney, Gloucestershire,

Alex was the the leasehold proprietor of a 2 bedroom apartment in Lydney being sold with a lease of a little over 61 years left. Alex informally spoke with his freeholder a well known Bristol-based freehold company and enquired on a premium to extend the lease. The freeholder indicated a willingness to extend the lease to 125 years on the basis of a new rent initially set at £150 per annum and increase every 25 years thereafter. Ordinarily, ground rent would not be payable on a lease extension were Alex to exercise his statutory right. Alex obtained expert legal guidance and was able to make an informed decision and deal with the matter and sell the property.

Lydney case:

Dr E Brooks moved into a one bedroom flat in Lydney in August 2001. The dilemma was if we could estimate the price would be for a 90 year extension to my lease. Identical residencies in Lydney with an extended lease were worth £290,000. The average ground rent payable was £45 invoiced quarterly. The lease concluded on 16 July 2094. Taking into account 73 years unexpired we approximated the compensation to the landlord to extend the lease to be within £9,500 and £11,000 exclusive of legals.

Lydney case:

In 2011 we were e-mailed by Mr and Mrs. N Miller who, having was assigned a lease of a basement apartment in Lydney in November 2006. The question was if we could shed any light on how much (approximately) premium would likely be for a ninety year lease extension. Identical premises in Lydney with an extended lease were valued around £240,600. The average amount of ground rent was £65 invoiced quarterly. The lease end date was on 20 March 2083. Considering the 62 years as a residual term we approximated the premium to the landlord to extend the lease to be within £21,900 and £25,200 not including legals.