If you currently own a flat built during the 1960, s, 1970’s or 1980’s, with a 99 year lease, you may experience difficulty in selling or mortgaging. This is due to the fact that, in the current climate, leases under 70 years can be particularly difficult to sell, and your property may well have unexpired terms of only 50-80 years.
Generally, mortgage lenders are not keen to lend on flats with short leases, as they do not provide them with enough security. Several lenders, including Halifax and Northern Rock, have increased their minimum lease term requirements during the past few months. Furthermore, if the unexpired term is 80 years or less, the premium payable may be much higher
Therefore, it is now advisable for leasehold owners of flats with short leases to exercise their right to extend their leases, especially if they are thinking of selling in the near future. .
The law states that 50% of the ‘marriage value’ – the amount by which the house or flat increases following the lease extension – needs to be paid as part of the compensation to the freeholder.
The sooner a lease extension is sought, the cheaper it will be. For example, a lease extension of a £250, 000 flat in London, with 81 years remaining on the lease, is likely to have a premium between £3, 000 and £6, 000, but to extend a lease for a property with closer to 65 years unexpired on the lease, the premium could jump to between £19, 000 and £24, 000.
Anyone interested in instigating and executing a lease extension should make contact with the leasehold conveyancing team here at Fridays.