For anyone whose Poundbury property is held on a long lease, the message is clear – if no remedial action is taken, your property will eventually revert to the freeholder, leaving you empty-handed. The shorter the lease the lower the value of the property and the more it will cost to extend the lease.
Leasehold residencies in Poundbury with in excess of 100 years outstanding on the lease are sometimes regarded as a ‘virtual freehold’. This is where the lease value the same as a freehold interest in your property. In such situations there is often little to be gained by buying the reversionary interest unless savings on ground rent and maintenance charges merit 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; |
| Barnsley Building Society | 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term. |
| 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. |
| Coventry Building Society | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| TSB | Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption. |
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 conveyancer we work with provide it.
In recent months James, came dangerously near to the 80-year mark with the lease on his studio flat in Poundbury. Having bought his property two decades ago, the lease term was of minimal bearing. As luck would have it, he became aware that he needed to take action soon on Extending the lease. James extended the lease just in the nick of time last July. James and the freeholder via the managing agents eventually agreed on a premium of £6,000 . If he failed to meet the deadline, the premium would have increased by at least £925.
Ms Paige Mason was assigned a lease of a purpose-built flat in Poundbury in August 2006. The dilemma was if we could shed any light on how much (approximately) price would likely be for a 90 year lease extension. Comparative homes in Poundbury with 100 year plus lease were worth £191,400. The average amount of ground rent was £55 collected every twelve months. The lease terminated on 12 April 2079. Taking into account 54 years outstanding we calculated the compensation to the freeholder to extend the lease to be between £34,200 and £39,600 plus fees.
In 2012 we were phoned by Dr Yasmin André who, having owned a basement flat in Poundbury in May 2003. We are asked if we could approximate the compensation to the landlord would be to extend the lease by ninety years. Comparable premises in Poundbury with an extended lease were valued about £295,000. The mid-range ground rent payable was £45 billed quarterly. The lease ended on 10 June 2099. Having 74 years outstanding we approximated the premium to the freeholder for the lease extension to be between £8,600 and £9,800 not including expenses.