South Kensington leases on residential deteriorating in value. Where your lease has about 90 years unexpired, you should start considering the need for a lease extension. An important point to note is that it is financially advisable for your lease extension to be in place before the term of the current lease dips under eighty years - otherwise a higher premium will be payable. Flat owners in South Kensington will mostly qualify for a lease extension; however a solicitor should be able check if you qualify. In certain circumstances you may not qualify. There are also strict deadlines and formalities to comply with once the process is triggered so it’s prudent to be guided by a conveyancing solicitor during the process.
It is conventional wisdom that a property with more than 100 years unexpired lease term is worth roughly the same as a freehold. Where an additional ninety 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 |
|---|---|
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| 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. |
| 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 Originations (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 Originations (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 0.5% 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 Originations): - 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 Originations (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 - Starting Ground Rent greater than 0.1% of the property value - Ground Rent review period less than or equal to 5 years - 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 Refer to Originations (Valuer will consider any impact on valuation figure and marketability): - Ground Rent is linked to any indices greater than RPI - Ground Rent is linked to the value of the building* - 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 0.5% 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 Originations): - 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 - Starting Ground Rent less than or equal to 0.1% of the property value - Ground Rent review period greater than 5 years - Ground Rent escalation less than or equal to RPI * 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 |
| Virgin | 85 years at the time of completion. If it's less, we require it to be extended on or before completion. |
Lease extensions in South Kensington can be a difficult process. We recommend you procure professional help from a conveyancer and valuer with experience in lease extensions.
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 South Kensington lease extensions and further afield, as well as any potential issues which may arise as well as problems with the Leasehold Valuation Tribunal.
Subsequent to protracted discussions with the freeholder of her garden flat in South Kensington, Abbie commenced the lease extension process just as the lease was coming close to the critical eighty-year threshold. The transaction was finalised in September 2014. The landlord’s costs were kept to an absolute minimum.
Mr and Mrs. Y Parker completed a purpose-built flat in South Kensington in June 2007. We are asked if we could shed any light on how much (roughly) premium could be to prolong the lease by ninety years. Comparative premises in South Kensington with 100 year plus lease were valued around £260,200. The average amount of ground rent was £65 collected every twelve months. The lease elapsed in 2087. Considering the 66 years remaining we estimated the premium to the landlord for the lease extension to be between £16,200 and £18,600 exclusive of legals.
An example of a Lease Extension decision 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 number of years remaining on the existing lease(s) was 51.93 years.