A guide to residential lease extensions
Fenn Wright has successfully acted for 15 leaseholders of a block in Ipswich on the negotiation of their lease extensions. Is it time to get your lease extended?
When a lease has below 80 years remaining, the value of the property can considerably decrease and potential buyers may be unable to obtain a mortgage. The cost of an extension is greatly reduced if applied for before this time.
Paul Wright, Head of Residential Surveying gives us his insight into residential lease extensions and how to approach them.
“There are currently 2.9 million leasehold flats in England. If you own one of these properties, it is important to keep an eye on your lease. Once the remaining length of your lease is down to 80 years or less, this may affect the ability to raise a mortgage and ultimately the value of the property. If your lease is reaching this point, it is advisable to get it extended, or even to consider jointly buying the freehold with the other homeowners in your block.
“Under the 1993 Leasehold Reform Act, most flat owners are legally entitled to obtain a 90-year extension to their lease, as long as they have owned the flat for at least two years. There are several 1960s-built blocks with 99-year leases in East Anglia where this is becoming an issue; some hopeful landlords are quoting high premiums for lease extensions.
“If you have over 80 years remaining on the lease, the cost of this extension is lower than it would be for properties with 80 years or less remaining, where you will have to pay 50% of the flat’s ‘marriage value’ on top of the usual lease extension price. Marriage value is the amount of extra value a lease extension would add to your property.”
Fenn Wright offers valuation advice if you are thinking of extending your lease, whether by a statutory 90-year lease extension under the terms of the Act, or by arrangement with your freehold, which can be undertaken at any time for any length of extension with any ground rent.
Paul goes on to explain: “An option if you are not happy with the maintenance charge or your leasehold’s freeholder is to go down a leasehold enfranchisement route. This is when the building’s flat owners club together to collectively purchase the freehold of the block, enabling you to appoint your own management company and therefore not pay ground rent. To undertake a collective enfranchisement, over 50% of the leasehold flat owners are required to participate in the purchase and collectively they would need to purchase the whole block’s freehold.
In both of the above scenarios, legal advice should be sought from a specialist legal advisor in tandem with valuation advice from a specialist Chartered Surveyor.”
For further information, please contact Paul Wright BSc. (Hons) MRICS on 01473 417718.