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Top reasons for Smithfield lease extension


Top reasons for lease extension now:

Increase your lease and increase your Smithfield property value

Smithfield leases on domestic properties are gradually losing value. if your lease has about 90 years unexpired, you should start thinking about a lease extension. It is important to recognise that it is that it is financially advisable for your lease extension to take place before the term of the existing lease falls lower than eighty years - otherwise a higher amount will be due. Flat owners in Smithfield will mostly qualify for a lease extension; however it’s a good idea to check with a conveyancing solicitor to confirm if you qualify. In some circumstances you may not be entitled. There are prescribed deadlines and procedures to comply with once the process is triggered so it’s best to be guided by a conveyancer during the process.

An extended lease has roughly the same value as a freehold

It is generally accepted that a residential leasehold with in excess of one hundred years unexpired lease term is worth approximately the same as a freehold. Where an further 90 years added to all but the shortest lease, the property will be worth the same as a freehold for decades to come.

Lending institutions may decide not to loan monies with a short lease

Mortgage lenders are less likely to give a loan offer on a domestic property in Smithfield with a short lease. Some lenders simply refuse a mortgage on leases with below 75 years left.

Lender Requirement
Barnsley Building Society 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
Birmingham Midshires Minimum 70 years from the date of the mortgage.
Nationwide Building Society - Our minimum unexpired lease term is 55 years, except where lending is over 85% of the purchase price/valuation on a second hand flat, in which case our minimum unexpired term is 90 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
- Where lending is over 85% of the purchase price/valuation on a second hand flat and the unexpired lease term on the offer is 90 years or more - only advise us if the actual lease term is less than 90 years.

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
- Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat
- 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 1% 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 (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat)
- 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 1% 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.
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.
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.

What makes us experts in Smithfield lease extensions?

Lease extensions in Smithfield can be a difficult process. We recommend you procure professional help from a lawyer and valuer well versed in the legislation and lease extension process.

We provide you with an expert from a selection of lease extension solicitors, which ensures a targeted and efficient service as you have a dedicated port of call with an individual lawyer. Our lease extension solicitors have a wealth of experience dealing with Smithfield lease extensions and further afield, as well as any potential issues which may arise as well as problems with the Leasehold Valuation Tribunal.

Smithfield Lease Extension Case Summaries:

Daisy, Smithfield, London,

After protracted correspondence with the landlord of her first floor flat in Smithfield, Daisy commenced the lease extension process as the eighty year mark was quickly coming. The transaction was finalised in January 2006. The freeholder’s charges were negotiated to about 500 pounds.

Smithfield case:

Mr Elijah Roux moved into a purpose-built flat in Smithfield in March 1997. We are asked if we could approximate the price would likely be for a ninety year extension to my lease. Comparable homes in Smithfield with an extended lease were in the region of £267,600. The mid-range amount of ground rent was £65 invoiced per annum. The lease ended on 9 June 2091. Given that there were 67 years left we estimated the compensation to the freeholder to extend the lease to be within £14,300 and £16,400 exclusive of professional charges.

Smithfield case:

In 2013 we were e-mailed by Mrs Olivia Clarke who, having completed a basement apartment in Smithfield in October 2005. We are asked if we could shed any light on how much (approximately) price would be for a 90 year extension to my lease. Comparative premises in Smithfield with a long lease were in the region of £201,200. The average ground rent payable was £55 billed annually. The lease elapsed in 2080. Considering the 56 years as a residual term we calculated the compensation to the freeholder for the lease extension to be between £31,400 and £36,200 exclusive of fees.