It’s a harsh certainty that a Salford residential lease is a wasting asset. As the lease term diminishes so does the value of the property. The extent of this is taken for granted in the first few years due to the deflation being disguised by increases in the Salford property market.Once your lease gets to 85ish years, you need to start thinking about a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease falls lower than 80 years - otherwise a higher amount will be due. Most leasehold owners in Salford will be able to extend under the legislation; however a lawyer should be able to confirm whether you are eligibility. In some situations you may not qualify. There are also strict deadlines and procedures to follow once the process has commenced and you will need to be guided by your lawyer throughout the process.
It is conventional wisdom that a property with over 100 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 premises will be equivalent in value to a freehold for many years ahead.
| 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. |
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage are not acceptable. 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. |
| Santander | If the property is leasehold, the remaining unexpired lease term at the end of the new mortgage term must be at least 50 years where any part of the mortgage is on Interest Only and 30 years if all loan parts are on Capital Repayment and Interest. You must report the unexpired lease term to us and await our instructions if:
|
| Virgin | 85 years at the time of completion. If it's less, we require it to be extended on or before completion. |
Retaining our service gives you enhanced control over the value of your Salford leasehold, as your property will be more valuable and marketable in relation to the lease length should you want to sell. The lawyers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
In recent months Mason, started to get close to the eighty-year threshold with the lease on his one bedroom apartment in Salford. Having bought his property 18 years previously, the length of the lease was of no interest. Luckily, he became aware that he would soon be paying way over the odds for Extending the lease. Mason arranged for a lease extension just ahead of time in March. Mason and the freeholder via the management company eventually agreed on a premium of £5,500 . If the lease had gone below eighty years, the amount would have gone up by at least £875.
Mr and Mrs. J Sharif bought a purpose-built apartment in Salford in February 2007. The dilemma was if we could estimate the premium could be for a ninety year extension to my lease. Identical flats in Salford with an extended lease were worth £260,000. The average amount of ground rent was £50 collected yearly. The lease expired in 2098. Having 72 years unexpired we estimated the premium to the landlord for the lease extension to be within £9,500 and £11,000 not including fees.
In 2011 we were phoned by Dr Connor Johnson who, having bought a purpose-built flat in Salford in March 1998. The dilemma was if we could estimate the premium would be to prolong the lease by a further 90 years. Comparable flats in Salford with a long lease were in the region of £256,600. The average ground rent payable was £60 billed quarterly. The lease termination date was on 7 March 2078. Having 52 years left we approximated the compensation to the landlord to extend the lease to be between £39,000 and £45,000 not including expenses.