Should I extend the lease on my leasehold property?
Whilst most houses in the UK are bought and sold on a freehold basis, the majority of flats are leaseholds, granted under leases for a fixed term.
Extending a shorter lease to a decent length can add thousands to the value of your leasehold property.
Most long leases are originally granted for a term of 99, 125 or 999 years and as the remaining term of the lease reduces this can affect the value of the property.
Generally, the shorter the lease, the higher the costs and the lower the asking price.
Under the 1993 Leasehold Reform Act, most flat-owners are legally entitled to get 90 years added to their lease at a fair market price.
To be legally entitled to extend your lease, you need to have owned the flat for at least two years. You don’t need to have lived there, just owned it.
Check how many years you have left and be aware of how the value and costs related to your leasehold property are affected as they drop below a certain number of years.
90 years and above
If you have above 90 years remaining on your lease, you need to set a reminder to look at extending it when it drops to around 82 years. This will give you the chance to extend your lease before it drops below 80 years which is when the costs to extend the lease go up significantly.
80 years or less
For a lease of 80 years and below, you will pay 50% of the flat’s ‘marriage value’ on top of the usual lease extension price. (the marriage value is the amount of extra value a lease extension would add to your property).
70 years or less
You are likely to find that that your mortgage rate increases.
60 years or less
You will struggle to re-mortgage your flat and if you want to sell it, you will probably have to sell it to a cash buyer at a reduced cost or try your luck at auction. The costs involved in extending the lease are considerably higher.
The cost of extending the lease
Extending a short lease can cost tens of thousands of pounds.
The price depends on several variables, including the flat’s value, the lease length and ground rent. It also depends on your negotiations.
Other costs to factor in are:
• Legal fees
• Valuation fees
• Stamp duty if applicable
A good solicitor can guide you through the process of extending your lease in the most cost effective way.
If you would like to discuss your own circumstances with one of our specialist property services lawyers, you will find contact details and locations here: FSM Solicitors