When is the right time for my lease extension?
If you own a long lease residential flat you are certainly not alone. Around 1.5 million households in England and Wales are owned on a long leasehold basis [ ie they were originally granted for a term of at least 21 years] and, like you, at some stage their owners will either have to opt for lease extension or see the lease expire entirely – and in the meantime watch the value of their property gradually drop.
Now currently, there may often seem no urgency in extending a lease, and of course there are a number of costs involved – so when is the right time to extend your lease?
Now is the time to extend your lease
Yes, as far as we’re concerned, it’s that simple – the right time to extend your lease is now.
Why? There are 4 good reasons
1. Short lease – rising premium
As each year passes and your lease gets shorter, the premium you’re going to need to pay to your freeholder for a leasehold extension gets bigger
2. Rising property price – rising premium
When the housing market is rising, or indeed when property prices have plateaued [as they do from time to time], are both great times to extend your lease. Why?
Because one of the factors which affect the premium you will need to pay to your freeholder for extend your lease is the price of your property. And as the value of your flat increases, so does the premium you will need to pay your freeholder for your lease extension. So you want to get in quickly for the price rises – otherwise any rise in the value of your flat, which is normally a good thing from your point of view, can actually rebound on you when it comes to lease extensions – because a higher value property price also means a higher premium to extend your lease
3. Marriage value – the 80 year rule
When the remaining term of your lease approaches 80 years you need to be particularly careful.
Why? Because the very day that the remaining term of any residential lease drops below 80 years, your freeholder is entitled to charge you t an additional premium [known as the marriage value] – and that marriage value normally means an increase in thousands of pounds in your premium. So even if your lease has got perhaps 85 years to run, don’t delay – get that lease extension started today.
In particular if you’re going the voluntary rather than statutory route, be beware of the 80 year rule – because a surprisingly large number of unscrupulous landlords will apparently agree to an informal lease extension of a lease when it’s approaching that 80 year point, only to withdraw from negotiations, which they are entirely permitted to do, the day the lease drops below 80 years – and therefore they get the benefit of the marriage value and you have to pay more to extend your lease.
4. Extend your lease well in advance of selling your property
Far too many people only find out that they have a problem with selling a flat with a short lease, when they actually come to put their property on the market.
Firstly many mortgage companies just won’t lend on flats with short leases. And even if your purchaser can find a mortgage company willing to lend to them, that mortgage offer will probably be on much less favourable terms – making the purchase of your flat that much less attractive.
Secondly even if money is available, many purchasers are simply put off by short lease properties.That can create real problems – so the best advice is to extend your lease well in advance of any plans you have to sell up.
How much could it cost if I put my lease extension off?
You might be very surprised. One London based freehold company recently estimated that every year you delay making a lease extension in London, will increase the cost of extending your lease by a remarkable 12%.
My schoolboy maths tells me, therefore, that when prices are rising at that level, the cost of extending your lease doubles in just under seven years.
Lease extension – let your solicitor help you make money!
Yes, odd as it sounds that’s correct. Now, many people are concerned about instructing a solicitor and in particular about the potential size of their legal bill.
But the right to lease extension was created by a government which was very keen to encourage home ownership – and as a result the factors that govern the calculation of your premium mean that it is almost certain that the increase in value of your flat as a direct result of the lease extension will exceed, often significantly, the entire cost of extending your lease.
So although you may be surprised to hear, this really is an occasion when your solicitor can make you money.
The conclusion? Extend your lease now
In short, I suggest you follow the advice given by my old granny – who always used to say “don’t put off tomorrow what you can do today”.
Don’t Put off Extending Your Lease – Contact Our Experts Today
Our specialist team can help you wherever your flat is situated in England and Wales – we help hundreds of clients nationwide every year with a lease extensions, taking instructions via phone, email and Skype video/FaceTime.
- Just call us on FREEPHONE 0800 1404544 for a FREE initial phone consultation and a FREE quote for your lease extension, OR
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