Is it time for a lease extension on your property?
If there is a lease on your property, then you should be aware of it becoming shorter with each passing year - this is the reason a lease is often referred to as a ‘dwindling asset’. If the lease becomes too short, then you may hit problems when trying to sell or re-mortgage the property. To avoid these problems becoming a reality you may need to explore the possibilities of a lease extension.
Individual long leasehold tenants have the right to extend a lease on their property, which means the property will be a far more saleable asset as lenders typically require a minimum number of years to be left on the lease before offering a mortgage. The number of years differs between lenders, but most require at least 70 years to be left on the lease - this is because lenders usually want the lease to extend at least 40 years after the end of the mortgage term, so the value of the property isn’t affected.
This means that once the lease drops much below 80 years then you should begin thinking about extending it.
Why should you get a lease extension on your property?
Most people do not consider the length of the lease on their property until they are wanting to sell up or obtain a new mortgage. If you do need to extend the lease, the best advice would be to begin the process of extending your lease as early as possible so that you can ensure you avoid any complications that may arise when selling, or when your current mortgage offer ends.
In most cases, the lease extension process can be completed quite quickly. If the terms of the extension (premium, length and ground rent) can be quickly agreed between the freeholder and leaseholder directly, then its simply a case of the solicitors drafting the deed to document the agreed terms.
If the terms of the lease extension cannot be agreed through direct negotiations between the freeholder and leaseholder, then providing certain qualifying conditions can be met, the leaseholder may have a statutory entitlement to extend their lease.
How do lease extensions work?
The Leasehold Reform, Housing and Urban Development Act 1993 provides long leaseholders of flats with certain rights to pursue a lease extension.
A very strict procedure must be followed from the outset, which is where experienced conveyancing and property solicitors can help and advise along the way. Solicitors will be able to ensure the entire process is followed correctly and that there is no dispute over your entitlement to exercise your rights to the lease extension. There are separate procedures that need to be adhered to for leasehold houses, which are much less common.
Extending the lease can take anything from just a few weeks to a year or more depending on how soon the terms can be agreed. If the terms cannot be agreed, then matters may need to be resolved by an expert Tribunal which can add significant time to the process - this is the reason we’d advise looking to extend your lease well in advance of any plans to sell or re-mortgage.
It’s also worth considering a surveyor as they will be best placed to advise on the premium costs of the new lease and will be able to enter negotiations with the freeholder’s surveyor to reach an agreed settlement.
If you’re looking to extend your lease or happen to be interested in buying or mortgaging a property with a short lease, then don’t hesitate to contact our qualified solicitors today for advice on your rights and how to best move things forward. Contact us by calling 01495 303124, e-mailing email@example.com or by completing our online contact form.