Leasehold property owners thinking of extending their lease now face unusually favourable circumstances for a lease extension.
- Over the last decade, lenders and conveyancing lawyers generally only accepted leases with more than 70 years to run.
- The buoyancy of the market was such that the number of years remaining under the lease (providing it was more than 70) was almost irrelevant to those involved on the purchasing side of a conveyancing transaction.
- At present, the majority of banks and building societies comprising the Council of Mortgage Lenders (98 per cent of lenders in England and Wales are CML members) will lend on properties with more than 65 years to run under the lease. Fridaysmove predicts that lenders’ requirements are set to toughen over the next couple of years as we see a significant shift in attitude towards risk management. This has already begun and some conveyancing lawyers may be surprised to note that over the last four months, five of the major lenders have toughened their lending requirements in relation to unexpired lease term. It is not inconceivable that within the next two years most lenders will not lend on properties with less than 75 years remaining. Therefore, now is the time to act.
- There is a misconception that lease extension can take months to complete. In nine out of 10 cases it is simply a question of negotiating the cost of the lease extension with the landlord or managing agent and formalising the drafting and registration of the new lease. With a good conveyancing solicitor this can often take less than four weeks and is well worth doing during the period that the property is being marketed as opposed to delaying the conveyancing transaction once a buyer and seller is found.
- Furthermore, a silver lining exists in the fact that compared to a few years ago, lease extension premiums are significantly reduced due to market deterioration. Landlords are generally commercially aware and I have found that in many cases it takes less than a week to negotiate a price. If the worst comes to the worst the formalities of serving the appropriate statutory notice on the landlord would have to take place. Nine out of 10 times however, the seller is able to negotiate the lease extension before getting any where near the doors of the ‘Leasehold Valuation Tribunal’.
For more information on lease extensions please contact one of our leasehold conveyancing lawyers in the Lease Extension Team who will he happy to assist.