A majority of buyers do not understand the implications of lease length when they are choosing to purchase a property. As long as their mortgage lender is happy to proceed with the purchase, it’s common for new owners to simply move in and forget about the remaining term.
It’s when the time comes for them to sell their home that the implications of a short lease become apparent. To estate agents, solicitors and buyers’ mortgage lenders, a lease term that is approaching 80 years (or has already fallen below that threshold) is cause for concern; greatly impacting the value of the property.
Fortunately, the Leasehold Reform, Housing and Urban Development Act 1993 gives all eligible Leaseholders (also known as tenants) the right to extend their lease by 90 years and reduce their annual ground rent to a “peppercorn” (zero).
If you own a leasehold property, here are our tips for ensuring the lease extension process is as smooth as possible.
1 – Check your eligibility
To be a qualifying Leaseholder, you must have owned the leasehold for a minimum of 2 years. The original lease must also have been a ‘long lease’ that granted residence for at least 21 years (or with clauses that provide similarly long-term ownership). There are further restrictions in place for charitable housing trusts and business or commercial leases.
2 – Calculate your cost
Leasehold extensions involve several parts and typically cost thousands of pounds. You can try our leasehold extension calculator to get an idea of your investment or speak to one of our experienced surveyors for a more accurate estimate. In any situation, the final premium will need to be negotiated with the Freeholder.
3 – Understand your lease
You can save yourself a lot of money, time and stress if you understand the implications of your lease length before you exchange contracts. By speaking to a specialist about how soon you might need to extend, or whether you need to budget for a lease extension as soon as possible, you can make a more informed decision about your purchase.
4 – Apply early
Even beyond the 2-year period of ownership before you apply for a lease extension, many homeowners are not in a hurry to extend their lease. It’s important to know that the cost of a lease extension increases significantly once the term drops below 80 years, and the process can take between 3 and 6 months to complete.
5 – Transfer title
If you are planning to sell your home before a lease extension completes, you can begin the process and make your buyers the beneficiary. This allows them to continue the process once they move in without having to wait 2 years – although the costs of doing this will usually mean they make a lower offer.
For more information about the formal leasehold extension process, or for professional assistance in negotiating with your Freeholder, please get in touch. Our team has extensive experience in leasehold property across London and would be happy to help.