Southampton residential property owned on a long lease is a wasting asset as the leaseholder merely owns the property for a period of years.
It is conventional wisdom that a property with in excess of 100 years remaining is worth approximately the same as a freehold. Where an further 90 years added to any lease with more than 35 years left, the residence will be equivalent in value to a freehold for many years in the future.
| Lender | Requirement |
|---|---|
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage should be declined (see exception below). Leases with greater than 70 years but fewer than 85 years remaining must be referred to issuing office. Leases with fewer than 70 years should only be referred to the issuing office where the following scenario applies, as discretion may be applied subject to bank approval: • Property is located in any of the following prestigious developments: Cadogan, Crown, Grosvenor, Howard de Walden, Portman or Wellcome Trust Estates in Central London AND • The value of the property subject to the short remaining term is £500,000 or more AND • The loan to value does not exceed 90% for purchases, 90% like for like re-mortgages, 80% for re-mortgages with any element of capital raising and 80% for existing Barclays mortgage borrowers applying for additional borrowing; |
| Barnsley Building Society | 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term. |
| Halifax | Minimum 70 years from the date of the mortgage. |
| Lloyds TSB Scotland | Minimum 70 years from the date of the mortgage. |
| 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. |
The conveyancers that we work with handle Southampton 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 conveyancer we work with provide it.
Jake owned a studio apartment in Southampton being sold with a lease of fraction over sixty years remaining. Jake on an informal basis contacted his landlord being a well known London-based freehold company and enquired on a premium to extend the lease. The freeholder was keen to agree an extension on non-statutory terms taking the lease to 125 years on the basis of a new rent to start with set at £200 per annum and doubled every twenty five years thereafter. Ordinarily, ground rent would not be due on a lease extension were Jake to invoke his statutory right. Jake obtained expert advice and was able to make a more informed judgement and handle with the matter and ending up with a market value flat.
Ms W Scott completed a one bedroom flat in Southampton in September 2009. We are asked if we could approximate the premium would likely be to extend the lease by an additional years. Similar properties in Southampton with 100 year plus lease were valued around £235,200. The mid-range ground rent payable was £45 invoiced annually. The lease terminated in 2091. Given that there were 66 years left we calculated the compensation to the freeholder for the lease extension to be within £12,400 and £14,200 plus fees.
Last Autumn we were contacted by Mrs P Peterson , who purchased a recently refurbished apartment in Southampton in January 2008. The question was if we could shed any light on how much (roughly) premium would likely be to extend the lease by ninety years. Comparable flats in Southampton with an extended lease were worth £275,000. The mid-range amount of ground rent was £55 collected yearly. The lease expired in 2102. Taking into account 77 years outstanding we approximated the compensation to the freeholder to extend the lease to be within £13,300 and £15,400 not including professional charges.