If you are facing a significant premium because your lease in South Kensington 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 start your South Kensington lease extension today:
A South Kensington leasehold property depreciates with the years remaining on the lease.
The re-sale value of a leasehold property in South Kensington is impacted by how many years the lease has left to run. If it is near to or fewer than eighty years you should foresee problems on re-sale, so it is advisable to arrange for the lease to be extended ahead of purchasing. It is ideal to start the process of extending the lease is when a lease still has 82 years unexpired so that a lease extension can be finalised in advance of the eighty year threshold. Current legislation enables South Kensington qualifying lessees to an additional term of 90 years in addition to the remaining term, at a peppercorn rent (no ground rent). The purpose of the valuation is to determine the amount payable by the lessee to the freeholder for the acquisition of the lease extension.
An extended lease has roughly the same value as a freehold
Leasehold premises in South Kensington with over one hundred years unexpired on the lease are sometimes regarded as a ‘virtual freehold’. This is where the lease is worth the same as a freehold interest in your property. In such situations there is often little upside in buying the freehold unless savings on ground rent and maintenance charges merit it.
Lenders may decide not to finance a property on a short lease
Many mortgage companies insist on a lengthy amount of time left on any leasehold residence before they will contemplate lending on it. Regardless of whether you require a mortgage, you should be conscious that it is likely that someone intending to purchase your property in the future might well do, so in the event that they can't secure a mortgage, then the financial worth of the property will likely suffer. In the last decade many mortgage lenders have increased the required minimum lease length that they are prepared to lend on
| Lender |
Requirement
|
|---|
| Coventry Building Society |
A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion.
|
| Leeds Building Society |
85 years remaining from the start of the mortgage.
|
| 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.
|
| Virgin |
85 years at the time of completion. If it's less, we require it to be extended on or before completion.
|
| 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.
|
Why use us for your lease extension in South Kensington?
The conveyancers that we work with procure South Kensington lease extensions and help protect your position. A lease extension can be arranged to be completed to coincide with a change of ownership so the costs of the lease extension are paid for using part of the sale proceeds. You really do need expert legal advice in this difficult and technical area of law. The lawyer we work with provide it.
South Kensington Lease Extension Example Cases:
Jason, South Kensington, West London,
Jason was the the leasehold proprietor of a conversion apartment in South Kensington being sold with a lease of a little over sixty years left. Jason on an informal basis spoke with his landlord a well known Bristol-based freehold company for a lease extension. The freeholder indicated a willingness to grant an extension taking the lease to 125 years on the basis of an increased rent to £200 per annum. No ground rent would be due on a lease extension were Jason to exercise his statutory right. Jason procured expert advice and was able to make a more informed judgement and deal with the matter and readily saleable.
South Kensington case:
In 2014 we were phoned by Dr Kelsey Hernández who, having completed a purpose-built apartment in South Kensington in August 2009. We are asked if we could shed any light on how much (roughly) price would be to prolong the lease by 90 years. Comparative homes in South Kensington with 100 year plus lease were valued around £205,000. The average amount of ground rent was £50 billed annually. The lease lapsed in 2105. Considering the 79 years unexpired we estimated the compensation to the freeholder to extend the lease to be between £8,600 and £9,800 exclusive of costs.
Decision in Kensington and Chelsea
An example of a Lease Extension case for a South Kensington flat is
Flat 16 21/22 Stanhope Gardens in November 2010. the Leasehold Valuation Tribunal concluded that the premium to be paid by the tenant on the grant of a new lease, in accordance with section 56 and Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993, was £106,975
This case related to 1 flat. The unexpired lease term was 51.93 years.