If you are facing a significant premium because your lease in Shoreditch has dropped toward the 80-year mark, your previous lawyer may be at fault. Our panel of experts specialise in recovering lease extension costs from negligent firms who failed to protect your investment.
Why you should commence your Shoreditch lease extension today:
A Shoreditch leasehold property depreciates with the years remaining on the lease.
Shoreditch leases on residential properties are gradually losing value. Where your lease has approximately 90 years remaining, you should start thinking about a lease extension. 80 years is a significant number: when the remaining term of a lease drops below this level then you start paying an additional element called marriage value. Leasehold owners in Shoreditch will usually be legally entitled to a lease extension; however a solicitor will confirm your eligibility. In some circumstances you may not qualify. There are prescribed deadlines and formalities to follow once the process has commenced so it’s sensible to be guided by a conveyancer during the process.
An extended lease has roughly the same value as a freehold
Leasehold properties in Shoreditch with in excess of one hundred 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 home. In such situations there is often little upside in purchasing the reversionary interest unless savings on ground rent and estate charges justify it.
Banks and Building Societies may not loan monies with a short lease
Lenders are really clamping down as regards to homes in Shoreditch with short leases. For instance you may find that their lending criteria are stricter and that they adjust interest rates depending on the unexpired lease term. Some may even refuse to lend completely, so where you wanted to sell, your only options would be to find a cash buyer, or try your luck at auction thus restricting the amount of potential purchasers.
| Lender |
Requirement
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| 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.
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| Bank of Scotland |
Minimum 70 years from the date of the mortgage.
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| Barnsley Building Society |
60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
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| Leeds Building Society |
85 years remaining from the start of the mortgage.
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| 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 Issuing Office (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 Issuing Office (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 1.0% 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
- 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 reviewed and altered on any review basis or methodology
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 1.0% 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 a proposed Lease Extension does not meet these requirements, however you feel that this is in the best interest for our mutual client, please refer all details to the Issuing Office for us to consider.
Please ensure that all lender enquiries are submitted (with full documentation/requirements) at least 2 weeks prior to exchange to allow sufficient time for review and decisioning.
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Why use us for your lease extension in Shoreditch?
Engaging our service will provide you increased control over the value of your Shoreditch leasehold, as your property will be more valuable and saleable in relation to the lease length should you decide to sell.
The lawyers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
Shoreditch Lease Extension Case Studies:
Jasmine, Shoreditch, London,
In the wake of 9 months of unsuccessful negotiations with the freeholder of her leasehold flat in Shoreditch, Jasmine commenced the lease extension process just as the lease was coming close to the all-important 80-year deadline. The legal work was finalised in July 2015. The landlord’s charges were negotiated to under 450 GBP.
Shoreditch case:
Last November we were contacted by Mr N Carter , who
owned a newly refurbished flat in Shoreditch in March 2002. We are asked if we could approximate the compensation to the landlord would be to extend the lease by 90 years. Comparative premises in Shoreditch with 100 year plus lease were valued around £174,200. The mid-range ground rent payable was £55 billed monthly. The lease ended in 2077. Considering the 51 years as a residual term we approximated the compensation to the landlord to extend the lease to be within £31,400 and £36,200 exclusive of professional charges.
Decision in Hackney
An example of a Lease Extension case for a Shoreditch residence is
137 & 139 Haberdasher Street in December 2013. The Tribunal determines in accordance with section 48 and Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993 that the premium for the extended lease for each Property should be £12,350.00.
This case related to 2 flats. The number of years remaining on the existing lease(s) was 72.39 years.