Buying a flat with an 81 year lease – the problems and how to overcome them

Lease extension solicitors – your solution to short lease problemsBuying a flat with 81 year lease. Specialist lease extension solicitors

Don’t let the fact that the flat you are considering buying has an 81 year lease on it make you completely rule out purchasing it. The critical amount of time left on a lease is 80 years. If the lease has below 80 years remaining the ‘marriage value’ component of the premium payable to the freeholder for the lease extension will add significantly to the cost of that extension – we are talking a few thousand pounds here at the very least.

From the day that the remaining term dips under that critical 80 year period, the ‘marriage value’ will steadily increase as the length of the lease decreases – so extending the lease should ideally be done before it drops below that 80 years point.
Click here to read more about Marriage Value and the government’s 2022 proposal to abolish it

Got a lease extension question? Call our specialist solicitors on FREEPHONE 0800 1404544 for FREE initial phone advice – with no strings attached.

Insufficient time for your lease extension? Your options

Unfortunately, although one year would give you enough time to get your lease extended under the relevant legislation, you would not be eligible to make that application as that same legislation stipulates that you must have owned the property for the minimum of two years. However, all is not lost and there are a number of possible options to save you from having to pay the marriage value. They are:

1) Approaching the freeholder to extend the lease on a voluntary, informal or private basis i.e. without having to make a formal S42 application under the Leasehold Reform, Housing and Urban Development Act 1993 (as amended). The potential downside to this option is that the freeholder might refuse outright, mindful that when your lease drops below 80 years remaining they will receive a higher premium as a result of the marriage value. Or they might agree and then change their mind, or finally they might agree but impose an inflated premium and disadvantageous lease conditions on you, knowing that you have no legal protection under the Leasehold Reform Act. Additionally, with no legally binding timescale to comply with the freeholder might agree to extend the lease and drag his feet until the lease drops below eighty years remaining.
Click here to read more about the voluntary lease extension

2) You could approach your seller and ask if he or she would, their eligible permitting, apply to extend the lease, but there is the possibility that they would refuse on the grounds that the cost of the flat includes a discount for the dwindling lease.

3) Finally you could see if the seller would be willing to serve the Initial Notice to extend the lease on the freeholder so that it can be assigned with the lease when the flat sale goes through. Tthis starts what is known as the formal statutory route to lease extension, and involves a right to an 90 years on the end of your lease and effectively zero ground rent in future. Once you have bought the flat you will then immediately be able to continue with the lease extension without having owned the property for the minimum two years specified in the Act. This option could be especially useful if you think that your mortgage provider would have problems with a property with a sub 80 year lease.

And there’s more good news with this formal statutory route – as soon the section 42 notice is served by the vendor, the lease effectively freezes – it stops getting shorter during the application process

Want help with your lease extension? Contact us today

One of our specialist lease extension solicitors will be able to advise you in detail on what is involved in extending the lease on a property with an 81 year lease.

Our team can advise you wherever you live in England and Wales and we don’t even need to see you – taking your instructions by e-mail, phone and Zoom video:

  • Just call us on [01722] 422300 for a FREE initial phone consultation and a FREE quote for your lease extension
  • Complete the contact form below

    How much does it cost to extend a lease?

    How much does it cost to extend a lease is one of the most common questions we face.

    We would love to give a clear and straightforward answer – but unfortunately it’s quite complicated. However, when extending your lease, you will need to pay the following factors.

    A premium to your freeholder to extend the lease

    If you agree a voluntary lease extension without the need to issue a formal notice, then it’s really up to you and your freeholder how much you pay.

    However, if you opt to choose the formal statutory route to lease extension, whereby you need to issue a formal notice etc, there are a number of factors which any valuer needs to take into account when calculating the right price.

    NB in our experience, it’s well worth appointing a specialist surveyor – because, to be frank, most surveyors rarely if ever come across lease extensions and do struggle with them. Instruct us and we are happy to organise a surveyor for you who knows what they’re doing when it comes to calculating the right premium you should be paying for your lease extension, and who is local to your property]

    When coming up with the right valuation, it’s worth noting that every lease varies as there are a number of factors involved, including the location of the property, property price and the length of the lease term remaining. In particular, the premium or compensation which you will have to pay to your freeholder in order to extend your lease is made up of a number of factors including:

    1. The reduction in the value of the freeholder’s interest – which, in broad terms is how much your landlord’s interest in your property is now, compared with the that value after the lease extension

    2. The Marriage value. This only applies when the lease term is under 80 years – but it can make quite a difference to the price – usually £000s. That’s why it is critically important to get your lease extension before the remaining term of your lease drops even one day below that critical 80 year period

    3. the amount of ground rent payable under the lease

    In the most general terms, however your property is super expensive [e.g. a flat in London’s Grosvenor Square], or your lease is down to his last few years, the premium is usually somewhere between £3K and £50K.

    Professional costs in extending a lease

    Leasehold extension is tricky and there are many traps for the unwary, not least in the timetable. We strongly recommend that you appoint both a specialist solicitor who can guide you through the procedure, and a specialist surveyor who can accurately value the right price for your lease extension.
    Click here to read more about reasons for appointing a specialist lease extension solicitor.

    So, in looking at how much it costs to extend your lease, you should add in the following professional costs;

    1. Your solicitor’s fees – for your information, we charge on an hourly rate, but to give you a rough idea, the average fees we charge for a routine lease extension will be in the region of £700 plus VAT for a voluntary or informal extension and around £1200 plus VAT if you choose to go down the statutory route.

    2. Your surveyors fees

    3. The reasonable legal costs of your landlord – to go down the statutory route, although the landlord has to grant your 90 lease extension, you also have to pay his legal costs – but they must be reasonable. In allowing for landlords legal costs, it’s worth noting that our team provide specialist city quality work at very competitive local prices – so don’t be surprised if your landlord’s costs are a little higher than the figures we quote above

    Statutory lease extension is designed to profit and incentivise the leaseholder

    It’s important to remember, when looking at the cost of extending a short lease that the system was originally introduced to support home ownership. As a result , and provided you get the right valuation first place, even after paying the premium to your freeholder and paying all relevant professional costs, the rise in value of your flat almost inevitably significantly exceeds those costs, leaving you in profit.

    In short, lease extension is one of the few areas where paying a solicitor is highly likely to actually makes you money!

    Looking to sell your flat, but haven’t got enough money to pay for a 90 year lease extension?

    Don’t worry – you have two alternatives;

    1. firstly, your solicitor can issue a notice to your freeholder to start the statutory procedure to increase your lease by 90 years – and your solicitor can assign, as part of the contract of sale of your property, the benefit of that application to the purchaser. This is particularly important because it means that the purchaser won’t have to wait until two years of ownership is up before applying for their lease extension – they can simply continue with the application for a 90 year lease extension started by you and your solicitor. If you got a short lease, this can make a real difference to your chances of getting a decent price for your flat on sale

    2. You can negotiate a short lease extension with your landlord. However, there are risks in going down this route – not least the fact that your landlord is not obliged to go ahead with the lease extension and can drop out at any stage. It may also find, that as part of the terms of a voluntary lease extension, the landlord may seek to impose other owners terms under a new lease, e.g. a significant increase in the ground rent, which could put off future purchasers, and make your property more difficult to sell

    Looking for specialist help to extend your lease?

    Our team is highly specialist – lease extension is all they do. Get in touch with us today.

    • Just call us on FREEPHONE 0800 1404544 for a FREE initial phone consultation and a FREE quote for your lease extension, OR
    • Complete the email contact form below