LEASE EXTENSIONS OF FLATS – WHAT SHOULD I DO?
We are all aware of the conflicting stories in the news regarding the Leasehold market and what the future looks like. For us, the question of whether to extend your Lease is something we are asked all the time. There are different factors that affect each case. The following article is designed to help you understand your options and make you aware of the current legislation. Ivan Ho, is our expert in this field and is on hand to help with your enquiries.
What are the proposed changes to the law on lease extensions of flats?
On 7th January 2021, the Government announced proposed leasehold reforms which included but not limited to a new right to allow leaseholders to extend their lease by a maximum term of 990 years at zero ground rent. Calculation of marriage value (in essence, the value unlocked by granting a new extended lease which will be an additional premium payable to the freeholder) will be replaced. However, two and a half years on, the legislation needed to put these changes in place has yet to be introduced. As such, there could still be a long wait before this promise is fulfilled.
Should I wait to extend my lease until the changes come into force?
Although many leaseholders may be prepared to wait, some leaseholders may wish to extend their leases now. For example, a leaseholder who is considering selling their flat may wish to extend their lease because potential buyers may not be able to obtain a mortgage if the term of the lease is too short. This is a common problem that can affect the successful sale of your flat.
What is the present position?
Currently, a leaseholder of a flat, who has owned the flat for more than two years, has a right by law to extend their lease for an additional 90 years at zero ground rent by paying a premium to the freeholder.
How much premium will I have to pay if I want to extend my lease?
The calculation of the premium is fairly complex. You should, therefore, seek advice from a surveyor specialising in this field.
It is based on a set formula that takes into account various factors such as the open market value of the flat, the remaining terms of the lease and the annual ground rent.
The premium payable will increase significantly if the term of the lease has less than 80 years remaining. This is because the freeholder will then be entitled to half of the marriage value.
When should I extend my lease?
You should consider moving forward with a lease extension if the remaining term of the lease is approaching 80 years. This is due to the fact that although the Government’s proposals in January 2021 stated that calculation of the marriage value will be replaced, there is no guarantee that this will result in lower premiums.
Does extending my lease add value to my property?
Generally it will increase the value of your property and make it more attractive to future purchasers.
How easy is it to extend my lease?
There are many different factors involved in this process that can affect the complexity and cost of the transaction. You will need expert lawyers to help you with this process. An experienced solicitor will be able to advise on the negotiations, prepare the necessary paperwork and register the extended lease at HM Land Registry.
At F Barnes Solicitors we care about your interests. Our clients come first and we pride ourselves on providing transparent and clear bespoke advice in the hope that we take the stress away from you.
If you would like to know more about the options available to you and the likely costs involved, please do get in touch. We are more than happy to discuss extending your lease with you. There is no obligation to instruct us but it is better to have taken the time to evaluate your options and decide what your next step will be.
Ivan Ho is an expert in property law, on both commercial and residential properties. Please do reach out for more information and contact Ivan via email or by calling 01708 745183.
Ivan can advise on all other aspects of a property transaction for busnesses and individuals which include: