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Why you should start your Shinfield lease extension


Top reasons for lease extension now:

A Shinfield leasehold property depreciates with the years remaining on the lease.

The market value of a leasehold property in Shinfield is impacted by how many years the lease has left to run. If it is close to or fewer than 80 years you should foresee problems on re-sale, so it is recommended to arrange for the lease to be extended ahead of purchasing. Ideally one should start the process of extending the lease is when a lease still has 82 years to run so that a lease extension can be addressed in advance of the 80 year mark. Leasehold Reform legislation entitles Shinfield qualifying lessees to an additional term of ninety years on top of the existing term, at a peppercorn rent (zero ground rent). The intention of the valuation is to arrive at an opinion of the amount payable by the lessee to the freeholder for the acquisition of the lease extension.

An extended lease is almost the same value as a freehold

It is generally accepted that a residential leasehold with over one hundred years remaining is worth approximately the equivalent as a freehold. Where an additional 90 years added to any lease with more than 45 years remaining, the premises will be equivalent in value to a freehold for decades to come.

Lenders may decide not to finance a property with a short lease

Almost all mortgage lenders require a lengthy amount of time remaining on a leasehold property before they will contemplate lending on it. Even if you don't need a mortgage, you should bear in mind that it is probable that someone wanting to buy your property in the future might well do, so if they can't get a mortgage, then the value of your property will likely suffer. Since 2008 many mortgage lenders have increased the required minimum lease length that they are prepared to accept

Lender Requirement
Bank of Scotland Minimum 70 years from the date of the mortgage.
Barnsley Building Society 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
Lloyds TSB Scotland Minimum 70 years from the date of the mortgage.
Nationwide Building Society - Our minimum unexpired lease term is 55 years.
- There must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start).

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 Issuing Office (Will be declined):
- Unexpired lease term less than 55 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 is less than or equal to 5 years

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
- Unexpired lease term is 55 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 Issuing Office):
- 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 Issuing Office (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 (does not apply to Shared Ownership)
- Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis
- Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
- 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 Issuing Office):
- 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
- A lease subject to a peppercorn Ground Rent (Annual Rent) charges

For the avoidance of doubt, any New Build properties completed but not sold pre-30 June 2022 will only be acceptable if the Lease conforms to the above guidance.

* 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.

Lease Extensions

We require all Lease Extensions to be completed under the Leasehold Reform Housing and Urban Development Act 1993 and to meet the above criteria as a minimum. Where you become aware that it does not meet these requirements, please refer to Issuing Office.
Royal Bank of Scotland Mortgage term plus 30 years. For a Lifetime Mortgage, the term must be no less than 150 years minus the age of the Borrower.

Why use us for your lease extension in Shinfield?

Regardless of whether you are a tenant or a landlord in Shinfield,the lease extension experts that we work with will always be willing to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Shinfield valuers.

Shinfield Lease Extension Case Summaries:

Jackson, Shinfield, Berkshire,

Jackson was the the leasehold proprietor of a studio flat in Shinfield being sold with a lease of fraction over 59 years outstanding. Jackson informally contacted his freeholder being a well known local-based freehold company and enquired on a premium to extend the lease. The freeholder indicated a willingness to extend the lease to 125 years subject to a new rent at the outset set at £200 per annum and doubled every twenty five years thereafter. Ordinarily, ground rent would not be payable on a lease extension were Jackson to invoke his statutory right. Jackson procured expert legal guidance and secured an acceptable deal informally and ending up with a market value flat.

Shinfield case:

Dr Teddy Young purchased a basement flat in Shinfield in April 2001. The question was if we could estimate the price would be to prolong the lease by 90 years. Comparative homes in Shinfield with an extended lease were in the region of £245,000. The mid-range amount of ground rent was £45 billed monthly. The lease came to a finish on 2 September 2091. Considering the 68 years remaining we estimated the premium to the freeholder to extend the lease to be within £9,500 and £11,000 exclusive of expenses.

Shinfield case:

Mr and Mrs. F Collins was assigned a lease of a one bedroom apartment in Shinfield in August 2007. The question was if we could shed any light on how much (roughly) premium could be to extend the lease by an additional years. Similar residencies in Shinfield with 100 year plus lease were valued about £285,000. The mid-range ground rent payable was £55 billed annually. The lease ended in 2102. Having 79 years remaining we calculated the premium to the landlord for the lease extension to be between £13,300 and £15,400 plus fees.