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Main reasons to commence your Sutton lease extension


Main reasons to commence your Sutton lease extension today:

Increase your lease and increase your Sutton property value

Unfortunately that a Sutton residential lease is a wasting asset. The lease value reduces in proportion to its lease length. The extent of this is not fully appreciated in the first few years due to the deflation being disguised by increases in the Sutton property market.Where your lease has approximately ninety years left, you need to start considering a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease falls below 80 years - otherwise a higher premium will be payable. Most leasehold owners in Sutton will be able to extend under the legislation; however a conveyancer should be able to clarify if you are eligibility. In some cases you may not qualify. There are also strict deadlines and procedures to be adhered to once the process has commenced and you will need to be guided by your conveyancing solicitor throughout the process.

An extended lease has roughly the same value as a freehold

Leasehold premises in Sutton with over one hundred years unexpired on the lease are often referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your premises. In such situations there is often little to be gained by buying the freehold unless savings on ground rent and maintenance charges justify it.

Mortgage lenders may not grant a mortgage on a short lease

Whether or not the lease is be regarded as a short lease varies by mortgage company, yet banks and building societies start to become jittery at around 75 years. This may be problematic once you wish to dispose of or remortgage your flat as it will be practically unmortgageable. You might not have an imminent plan to sell but when you do your purchaser must hold off for 2 years before they can exercise the right to a a lease extension.

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;
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.
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 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 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 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 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 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 you become aware that it does not meet these requirements, please refer to the Issuing Office
Royal Bank of Scotland Mortgage term plus 30 years.

What makes us experts in Sutton lease extensions?

Engaging our service gives you better control over the value of your Sutton leasehold, as your property will be more valuable and marketable in terms of lease length should you want to sell. The conveyancing solicitors that we work with have a in-depth market knowledge handling many hundreds of lease extensions or freehold purchase transactions.

Sutton Lease Extension Example Cases:

Leah, Sutton, South London,

Following lengthy negotiations with the freeholder of her leasehold apartment in Sutton, Leah initiated the lease extension process just as her lease was nearing the critical eighty-year mark. The transaction was finalised in April 2013. The freeholder’s fees were restricted to about 500 GBP.

Sutton case:

In 2012 we were e-mailed by Mr I Petit who, having owned a basement flat in Sutton in October 1999. The dilemma was if we could estimate the price could be for a 90 year extension to my lease. Comparable residencies in Sutton with 100 year plus lease were worth £218,000. The mid-range amount of ground rent was £45 invoiced yearly. The lease expired in 2086. Having 63 years remaining we calculated the premium to the landlord to extend the lease to be within £17,100 and £19,800 not including costs.

Decision in Sutton

An example of a Freehold Enfranchisement case for a Sutton residence is Buchanan Court 39 Vernon Road in April 2010. the Tribunal assessed that the premium payable for the freehold of the block should be £44,000. This case related to 2 flats. The unexpired residue of the current lease was 66.67 years.