Poundbury leases on residential properties are gradually losing value. Where your lease has in the region of 90 years left, you should start considering the need for a lease extension. If lease term dips under 80 years, you will then be required to pay 50% of the property's 'marriage value' on top of the usual cost of the lease extension to the landlord. Marriage value is the amount of additional value that a lease extension will add to the property. Leasehold owners in Poundbury will mostly be legally entitled to a lease extension; however a solicitor should be able confirm your eligibility. In some circumstances you may not qualify. There are prescribed deadlines and procedures to follow once the process is initiated so it’s best to be guided by a lawyer during the process.
Leasehold properties in Poundbury with in excess of 100 years remaining on the lease are often referred to as ‘virtual freehold’. This is where the lease is worth 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 estate charges warrant it.
| 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; |
| Leeds Building Society | 85 years remaining from the start 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 |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
| Yorkshire 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. |
The conveyancing solicitors that we work with undertake Poundbury 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.
Subsequent to unsuccessful discussions with the landlord of her purpose-built flat in Poundbury, Yasmin initiated the lease extension process just as the lease was nearing the crucial eighty-year threshold. The legal work completed in October 2005. The freeholder’s costs were negotiated to less than five hundred pounds.
Mrs Olivia Mason moved into a one bedroom apartment in Poundbury in March 2005. We are asked if we could estimate the compensation to the landlord would be to extend the lease by 90 years. Similar flats in Poundbury with an extended lease were in the region of £216,000. The mid-range ground rent payable was £60 invoiced quarterly. The lease came to a finish on 28 November 2083. Considering the 58 years left we approximated the premium to the freeholder for the lease extension to be between £28,500 and £33,000 not including expenses.
In 2009 we were approached by Mr and Mrs. P Green who, having purchased a basement flat in Poundbury in March 2008. The question was if we could shed any light on how much (approximately) price could be to extend the lease by 90 years. Comparable residencies in Poundbury with an extended lease were in the region of £205,000. The average amount of ground rent was £50 billed annually. The lease terminated in 2103. Taking into account 78 years unexpired we estimated the premium to the landlord for the lease extension to be within £8,600 and £9,800 not including costs.