Redland leases on residential properties are gradually losing value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of the lease becomes more expensive. Legislation has been in place for sometime now which entitles qualifying Redland residential leaseholders to extend the terms of long leases. Where you are a leasehold owner in Redland you would be well advised to investigate if your lease has between 70 and ninety years left. There are good reasons why a Redland flat owner with a lease having around eighty years unexpired should take steps to make sure that a lease extension is put in place without delay
Leasehold residencies in Redland with over 100 years left on the lease are often regarded as a ‘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 buying the freehold unless savings on ground rent and maintenance charges warrant it.
| Lender | Requirement |
|---|---|
| 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. |
| Halifax | Minimum 70 years from the date of the mortgage. |
| Lloyds TSB Scotland | Mortgage term plus 30 years subject to an overall minimum term of 70 years |
| 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 |
| 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 procure Redland 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 lawyer we work with provide it.
Nathaniel owned a studio flat in Redland on the market with a lease of a few days over 72 years remaining. Nathaniel on an informal basis approached his freeholder a well known London-based freehold company for a lease extension. The landlord indicated a willingness to grant an extension taking the lease to 125 years subject to a rise in the rent to £100 per annum. No ground rent would be payable on a lease extension were Nathaniel to exercise his statutory right. Nathaniel procured expert legal guidance and secured satisfactory deal informally and sell the property.
Mr J Thompson owned a ground floor apartment in Redland in October 2011. The dilemma was 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 Redland with an extended lease were worth £261,600. The average amount of ground rent was £60 collected quarterly. The lease lapsed on 6 June 2073. Given that there were 52 years left we calculated the compensation to the freeholder for the lease extension to be between £39,000 and £45,000 plus costs.
Last year we were called by Mr Jackson Ramírez , who owned a basement apartment in Redland in May 2002. We are asked if we could shed any light on how much (roughly) premium could be to extend the lease by a further 90 years. Similar flats in Redland with 100 year plus lease were valued around £218,000. The mid-range amount of ground rent was £45 collected annually. The lease concluded in 2084. Given that there were 63 years remaining we estimated the premium to the landlord to extend the lease to be within £17,100 and £19,800 exclusive of fees.