Smithfield leases on residential properties are gradually decreasing in value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of your lease gets more expensive. Legislation has been in place for sometime now which permits qualifying Smithfield residential leaseholders to extend the terms of long leases. Where you are a leasehold owner in Smithfield you should see if your lease has between seventy and ninety years remaining. In particular once the remaining lease term slips under 80 years, the premium due on any lease extension increases dramatically as part of the premium you pay is what is known as a marriage value
Leasehold residencies in Smithfield with over one hundred years remaining on the lease are often regarded as a ‘virtual freehold’. This is where the lease is worth 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 service charges justify it.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Birmingham Midshires | 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. |
Engaging our service gives you enhanced control over the value of your Smithfield leasehold, as your property will be more valuable and marketable in respect of lease length should you want to sell. The lawyers that we work with have a wealth of experience of handling many hundreds of lease extensions or freehold purchase transactions.
Trailing lengthy discussions with the freeholder of her basement apartment in Smithfield, Stephanie initiated the lease extension process as the 80 year deadline was quickly nearing. The lease extension was finalised in October 2010. The landlord’s charges were kept to an absolute minimum.
Last year we were contacted by Mr M King , who owned a basement apartment in Smithfield in November 1996. The question was if we could approximate the premium would likely be for a 90 year lease extension. Comparable flats in Smithfield with an extended lease were worth £216,000. The mid-range amount of ground rent was £60 billed annually. The lease came to a finish on 15 August 2084. Having 58 years unexpired we approximated the premium to the freeholder for the lease extension to be between £28,500 and £33,000 not including costs.
Last June we were e-mailed by Mr and Mrs. A Lefèvre , who acquired a first floor flat in Smithfield in July 2012. The question was if we could estimate the premium would be to prolong the lease by a further 90 years. Similar flats in Smithfield with an extended lease were valued about £200,000. The mid-range amount of ground rent was £50 billed annually. The lease ran out in 2104. Given that there were 78 years left we approximated the compensation to the freeholder to extend the lease to be within £8,600 and £9,800 exclusive of expenses.