Westminster leases on residential properties are gradually losing value. Where your lease has about 90 years remaining, you should start considering the need for a lease extension. If lease term is less than eighty years, you will then be required to pay 50% of the property's 'marriage value' in addition to the standard cost of the lease extension to the landlord. Marriage value is the amount of extra value that a lease extension will add to the property. Leasehold owners in Westminster will usually be legally entitled to a lease extension; however a solicitor should be able confirm your eligibility. In certain cases you may not be entitled. There are prescribed deadlines and procedures to follow once the process has commenced so it’s sensible to be guided by a conveyancing solicitor during the process.
It is generally considered that a property with more than 100 years unexpired lease term is worth approximately the equivalent as a freehold. Where an further ninety years added to any lease with more than 30 years remaining, the residence will be worth the same as a freehold for many years in the future.
| Lender | Requirement |
|---|---|
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage are not acceptable. 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. |
| Leeds Building Society | 85 years remaining from the start of the mortgage. |
| 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. |
| Skipton Building Society | 85 years from the date of completion of the mortgage For Buy to Let cases: - lettings must not breach any of the lessee’s covenants; and - consent of the lessor to lettings must be obtained if necessary |
The conveyancers that we work with undertake Westminster 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 conveyancing solicitor we work with provide it.
Last Winter Ethan, came seriously near to the eighty-year threshold with the lease on his first floor flat in Westminster. Having purchased his flat twenty years ago, the length of the lease was of no significance. Luckily, he noticed he needed to take steps soon on a lease extension. Ethan was able to extend his lease at the eleventh hour last July. Ethan and the freeholder ultimately agreed on the final figure of £5,500 . If the lease had descended to less than 80 years, the price would have escalated by at least £1,100.
Last July we were contacted by Mr and Mrs. D Taylor , who bought a purpose-built flat in Westminster in May 2007. We are asked if we could approximate the premium would be for a ninety year extension to my lease. Comparative residencies in Westminster with 100 year plus lease were worth £227,800. The average amount of ground rent was £45 billed per annum. The lease expired in 2091. Having 65 years as a residual term we calculated the compensation to the landlord to extend the lease to be between £13,300 and £15,400 not including expenses.
An example of a Lease Extension decision for a Westminster property is Flats 12A & 19, Evelyn Mansions Carlisle Place in June 2009. The Tribunal held that the price to be paid for the new lease of Flat 12A is £168,824, For the other flat the price was set at £169,110 This case was in relation to 2 flats. The unexpired term as at the valuation date was 56 years.