Southwark leases on residential properties are gradually diminishing in value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of the lease gets more expensive. It is the case that most Southwark tenants have the right to extend their lease by an additional 90 years under the 1993 Leasehold Reform Act. If you are a leasehold owner in Southwark you would be well advised to investigate if your lease has between seventy and ninety years remaining. There are compelling reasons why a Southwark leaseholder with a lease having around eighty years unexpired should take steps to ensure that a lease extension is effected without delay
Leasehold properties in Southwark with more than 100 years left on the lease are often referred to as ‘virtual freehold’. This is where the lease is worth the same as a freehold interest in your premises. In such situations there is often little to be gained by purchasing the freehold unless savings on ground rent and maintenance charges merit it.
| 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; |
| 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. |
| National Westminster Bank | Mortgage term plus 30 years. |
| Virgin | 85 years at the time of completion. If it's less, we require it to be extended on or before completion. |
Using our service gives you enhanced control over the value of your Southwark leasehold, as your property will be more valuable and saleable in relation to the lease length should you want to sell. The conveyancers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
Ibrahim owned a high value apartment in Southwark being sold with a lease of a little over 72 years outstanding. Ibrahim informally approached his landlord being a well known London-based freehold company and enquired on a premium to extend the lease. The landlord indicated a willingness to grant an extension taking the lease to 125 years subject to a new rent at the outset set at £100 per annum and increase every twenty five years thereafter. Ordinarily, ground rent would not be payable on a lease extension were Ibrahim to invoke his statutory right. Ibrahim procured expert legal guidance and secured an acceptable deal informally and ending up with a market value flat.
In 2011 we were phoned by Dr Harvey Leroy who, having purchased a garden flat in Southwark in January 1998. The question was if we could approximate the compensation to the landlord would be to prolong the lease by ninety years. Identical residencies in Southwark with a long lease were valued around £270,000. The average amount of ground rent was £55 billed yearly. The lease finished on 15 August 2100. Taking into account 75 years left we estimated the compensation to the landlord to extend the lease to be within £9,500 and £11,000 exclusive of professional charges.
An example of a Freehold Enfranchisement matter before the tribunal for a Southwark premises is 1-41 Royal Tower Lodge 40 Cartwright Street in April 2013. the tribunal adding the agreed value of capitalised ground rents and the reversion the price to be paid for the freehold was £1,187,000 This case was in relation to 41 flats. The unexpired term was 107 years.