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Top reasons for Machen lease extension


Top reasons for lease extension now:

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

Machen leases on residential properties are gradually diminishing in value. The shorter the remaining lease term becomes, the less it is worth – and accordingly any extension of your lease becomes more expensive. The majority of owners of residential leasehold property in Machen enjoy rights under legislation to extend the terms of their leases. If you are a leasehold owner in Machen you really ought to check if your lease has between 70 and ninety years remaining. There are compelling reasons why a Machen flat owner with a lease having around 80 years unexpired should take action to make sure that a lease extension is effected without delay

An extended lease has roughly the same value as a freehold

It is generally considered that a property with over one hundred years remaining is worth approximately the equivalent as a freehold. Where an further 90 years added to any lease with more than 45 years unexpired, the property will be worth the same as a freehold for decades to come.

Mortgage lenders may decide not to issue a mortgage on a short lease

The trend since 2008 has been for banks to tighten lending requirements generally - this has extended to the types of security over which the home loan is to be granted. This has resulted in the minimum number of years remaining under the lease required by banks has increased. Historically lenders would grant a mortgage on a lease with twenty years plus the term of the loan - typically fifty year leases but those requirements are being increasingly undermined by the requirement for lengthy leases - many use a minimum term of 75 years as a prerequisite.

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.
Bank of Scotland Minimum 70 years from the date 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.
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



Virgin 85 years at the time of completion. If it's less, we require it to be extended on or before completion.

Why use us for your lease extension in Machen?

The conveyancing solicitors that we work with undertake Machen 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.

Machen Lease Extension Example Cases:

Michael, Machen, Caerphilly

In 2014 Michael, came precariously near to the eighty-year threshold with the lease on his garden flat in Machen. Having bought his home two decades ago, the lease term was of no interest. Luckily, he noticed he would soon be paying an inflated amount for Extending the lease. Michael arranged for a lease extension just in the nick of time in May. Michael and the freeholder in the end agreed on a premium of £5,500 . If the lease had slipped below eighty years, the amount would have escalated by a minimum £850.

Machen case:

In 2012 we were e-mailed by Mr and Mrs. S Hall who, having purchased a one bedroom apartment in Machen in March 2007. We are asked if we could shed any light on how much (approximately) premium would likely be for a ninety year extension to my lease. Comparative properties in Machen with an extended lease were worth £200,000. The average ground rent payable was £50 billed yearly. The lease expired in 2098. Having 77 years as a residual term we estimated the compensation to the freeholder for the lease extension to be between £8,600 and £9,800 not including expenses.

Machen case:

In 2009 we were called by Mr and Mrs. K Rose who, having took over the lease of a ground floor apartment in Machen in July 2008. We are asked if we could approximate the compensation to the landlord would likely be for a ninety year extension to my lease. Identical flats in Machen with 100 year plus lease were worth £260,200. The mid-range ground rent payable was £65 collected quarterly. The lease expiry date was on 25 January 2087. Given that there were 66 years as a residual term we estimated the premium to the freeholder for the lease extension to be within £16,200 and £18,600 exclusive of expenses.