It’s an underpublicised truth that a Shoreham By Sea residential lease is a wasting asset. The lease value reduces in proportion to its lease length. The extent of this is taken for granted in the early years due to the deflation being disguised by increases in the Shoreham By Sea property prices.Where your lease has approximately 90 years left, you need to start considering a lease extension. If the number of years remaining slips under eighty years, you will end up paying half of the property's 'marriage value' on top of the usual cost of the lease extension to the landlord. Marriage value is the amount of additional value that a lease extension will add the property Most leasehold owners in Shoreham By Sea will be able to extend under the legislation; however a conveyancing solicitor should be able to clarify if you are eligibility. In some cases you may not be entitled. There are also strict timeframes and procedures to follow once the process has commenced and you will need to be guided by your conveyancing solicitor for the duration of the formalities.
It is conventional wisdom that a property with in excess of 100 years unexpired lease term is worth roughly the equivalent as a freehold. Where an further 90 years added to any lease with more than 35 years left, the property will be equivalent in value to a freehold for many years ahead.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| 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. |
| Santander | You must report the unexpired lease term to us and await our instructions if: 1. the unexpired term assumed by our valuer is between 55 and 82 years, but the actual unexpired term differs by more than one year (whether longer or shorter); or 2. the unexpired term assumed by our valuer is more than 82 years but the actual unexpired term is less than 82 years; or 3. no valuation report is provided However, we will not accept a lease where on expiry of the mortgage: (i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or (ii) less than 30 years remain and the loan is repaid on a capital and interest basis We will accept a lease that has been extended under the provisions of the Leasehold Reform Act 1993 provided statutory compensation would be available to the leaseholder. |
| 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 you become aware that it does not meet these requirements, please refer to the Issuing Office 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. |
Engaging our service will provide you enhanced control over the value of your Shoreham By Sea leasehold, as your property will be more valuable and saleable in terms of lease length should you wish to sell. The conveyancers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
Aiden was the the leasehold proprietor of a 2 bedroom flat in Shoreham By Sea on the market with a lease of a few days over sixty years left. Aiden on an informal basis contacted his landlord being a well known local-based freehold company and enquired on a premium to extend the lease. The landlord indicated a willingness to extend the lease to 125 years subject to a new rent at the outset set at £100 per annum and increase every 25 years thereafter. No ground rent would be due on a lease extension were Aiden to invoke his statutory right. Aiden procured expert legal guidance and was able to make an informed judgement and handle with the matter and ending up with a market value flat.
Last month we were e-mailed by Mr J Edwards , who bought a purpose-built apartment in Shoreham By Sea in November 2004. The question was if we could approximate the premium would likely be to extend the lease by an additional years. Comparable residencies in Shoreham By Sea with a long lease were in the region of £255,000. The average ground rent payable was £50 collected per annum. The lease ran out on 18 November 2096. Given that there were 71 years as a residual term we calculated the compensation to the freeholder for the lease extension to be within £9,500 and £11,000 plus professional charges.
In 2011 we were phoned by Dr Bethany Stewart who, having acquired a one bedroom apartment in Shoreham By Sea in April 2010. The dilemma was if we could shed any light on how much (roughly) compensation to the landlord would likely be for a ninety year extension to my lease. Comparable flats in Shoreham By Sea with an extended lease were in the region of £254,200. The average amount of ground rent was £60 collected per annum. The lease expired in 2076. Having 51 years remaining we approximated the premium to the landlord to extend the lease to be within £43,700 and £50,600 not including professional charges.