When it comes to long leasehold premises in March, you are actually purchasing a right to live in a property for a set period of time. In recent years flat leases typically tend to be for 99 years or 125. Even though this may appear like a lengthy period of time, you should consider extending the lease sooner as opposed to later. The general rule is that the shorter the number of years is the cost of extending the lease increases markedly especially once there are less than 80 years left. Residents in March with a lease approaching 81 years left should seriously think of extending it sooner than later. When the lease term has below 80 years outstanding, under the current legislation the landlord can calculate and levy a larger premium, based on a technical multiplication, known as “marriage value” which is due.
It is generally accepted that a residential leasehold with more than one hundred years unexpired lease term is worth approximately the equivalent as a freehold. Where an further 90 years added to all but the shortest lease, the property will be equivalent in value to a freehold for many years in the future.
| Lender | Requirement |
|---|---|
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage should be declined (see exception below). Leases with greater than 70 years but fewer than 85 years remaining must be referred to issuing office. Leases with fewer than 70 years should only be referred to the issuing office where the following scenario applies, as discretion may be applied subject to bank approval: • Property is located in any of the following prestigious developments: Cadogan, Crown, Grosvenor, Howard de Walden, Portman or Wellcome Trust Estates in Central London AND • The value of the property subject to the short remaining term is £500,000 or more AND • The loan to value does not exceed 90% for purchases, 90% like for like re-mortgages, 80% for re-mortgages with any element of capital raising and 80% for existing Barclays mortgage borrowers applying for additional borrowing; |
| Birmingham Midshires | 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 |
| TSB | Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption. |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
Using our service gives you better control over the value of your March leasehold, as your property will be more valuable and marketable in respect of lease length should you wish 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.
During the course of the last few months Tommy, came critically close to the 80-year threshold with the lease on his purpose- built flat in March. In buying his property two decades ago, the lease term was of minimal interest. Fortunately, he realised he needed to take steps soon on Extending the lease. Tommy was able to extend his lease at the eleventh hour last August. Tommy and the freeholder via the management company in the end agreed on a premium of £6,000 . If he had missed the deadline, the amount would have become more exhorbitant by a minimum £900.
In 2010 we were approached by Mr and Mrs. E Walker who, having bought a studio apartment in March in June 2004. We are asked if we could approximate the premium could be to extend the lease by ninety years. Identical premises in March with 100 year plus lease were valued about £295,000. The mid-range ground rent payable was £50 collected annually. The lease ended in 2100. Considering the 75 years left we approximated the premium to the landlord for the lease extension to be within £8,600 and £9,800 plus expenses.
Last Winter we were e-mailed by Dr G Scott , who acquired a first floor flat in March in March 2002. We are asked if we could shed any light on how much (roughly) compensation to the landlord would be to extend the lease by an additional years. Similar residencies in March with an extended lease were valued about £250,400. The mid-range ground rent payable was £65 collected monthly. The lease expired in 2089. Given that there were 64 years as a residual term we approximated the premium to the landlord to extend the lease to be within £19,000 and £22,000 not including professional charges.