Act now to potentially save on your lease extension
The lease on your property could be a financial timebomb. However, acting quickly may save you money.
If your property is leasehold rather than freehold, you need to keep an eye on the length of your lease. If you let the duration of your lease fall too short, it could cost you a substantial amount of money should you ever want to sell or remortgage. However, extending your lease is usually quite a simple process, as long as you approach it the right way.
In this article, we’re going to look at why you may need to extend your lease, as well as how to do it.
The difference between lengths of lease
Many leaseholders would have bought properties on 99-year leases, as was the convention in the 1980s and 90s. But today, those leases will have dropped below the acceptable threshold, if they have not been extended.
New buyers generally will not buy leasehold properties with less than 80 years left on the lease. This is because most banks will not offer a mortgage on a property with a shorter lease. If you have less than 60 years left on the lease, you may struggle to sell it all and be limited to only cash buyers.
The problem for leaseholders is this – to extend a lease with less than 80 years left is considerably more expensive than renewing one with more than this amount. This is because the law requires you pay an extra ‘marriage fee’ to the freeholder.
Why should you extend your lease?
If you find your lease is nearing that 80-year mark, it could save you a substantial amount of money in the long-term if you apply to extend your lease now. You may not have any plans to sell up or remortgage at the moment, but who knows how you will feel in the future?
Why risk having to pay a marriage fee later, when you can extend your lease for a much smaller cost now?
As long as you have owned your property for more than two years, you are entitled to a 90-year lease extension at a fair market price along with reducing ground rent to zero, in accordance with the 1993 Leasehold Reform, Housing and Urban Development Act.
How to extend your lease
Your first action should be to appoint a solicitor to help you navigate your way through the process. A Property Lawyer will know the ins and outs of the application and will help you deal with the freeholder, who is also likely to have a lawyer on board.
Next, get a valuation surveyor to price up what they believe is a realistic premium (cost) for your lease extension.
Then, it’s time to make it official. Serve the freeholder with a Section 42 notice under the 1993 Leasehold Reform, Housing and Urban Development Act. You should propose the price your surveyor recommended as a premium for the extension. You must also specify a deadline for your freeholder to respond, either accepting your terms or proposing a counter offer. This deadline must be more than two months from the date of the Section 42 notice.
After that, you play the waiting game. You may need to negotiate with your freeholder to achieve a price acceptable to both parties. However, once all is agreed and you pay your fee, the extension process is over.
Potential problems
There are a couple of issues that can arise. If your freeholder does not respond before the deadline expires, you can submit an application to the county court for an extension on your original terms.
If you cannot agree on a premium with the freeholder, your application can be heard by an independent tribunal. Your solicitor will be on hand to guide you through this process.
Find out more
If you’re thinking of extending the lease on your property, talk to a property solicitor today.
Couchman Hanson are members of the Association of Leasehold Practitioners and our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.
Call 01428 722189 or email enquiries@couchmanhanson.co.uk