To be able to sell a flat easily the unexpired term of the lease has to be acceptable to the majority of mortgage lenders. In practical terms that is now usually taken as being at least seventy years.
All leases are granted for a period of time – known as the term – and residential leases are frequently granted for a term of only 99 years. As the outstanding term gradually becomes shorter, leasehold homes become less and less attractive to buyers and their mortgage lenders.
Legislation now gives leaseholders the right to ask for the term to be extended – known as a lease extension. So even if your lease has more than eighty years to run you must seriously consider getting an extension of the lease term as soon as possible. Here are some of the reasons for doing so:
- Makes it quicker and easier to sell the property
- Increases the value of the property
- Avoid the ‘marriage value’ trap while there are at least 80 years unexpired
- Get a lease with no annual ground rent
- Makes it easier to re-mortgage
Potential buyers will find they can’t get a mortgage
Many flat-owners make the mistake of delaying until they want to sell, and then discovering that potential buyers cannot get a mortgage unless the lease has been extended. Getting a lease extension is not always a quick process – landlords can delay proceedings for months – and buyers may not be prepared to wait while the legal paperwork is completed.
Having a short lease will also affect your ability to re-mortgage the property. You might see an attractive mortgage product on offer, but if your lease is unacceptably short for the new lender, you could miss out on a lower interest rate.
Avoid the ‘marriage value’ trap
When a lease has less than eighty years unexpired, the amount or premium payable to the freeholder for the lease extension is affected by something known as ‘marriage value’. This is a complicated matter and is explained more fully elsewhere, but suffice it to say that it can increase the premium considerably.
Another reason for getting a lease extension before selling is that a leaseholder has to have owned a property for a minimum of two years before being entitled to apply under the legislation. Although it is possible for a seller to serve a statutory notice and assign the benefit of it to a buyer, buyers are not always happy at the prospect of having to deal with the extension themselves – and the price they will pay for the property will be reduced accordingly.
How much will it cost?
The first step is to find out how much you can expect to pay for the lease extension. Fridaysmove can help with this – our online lease extension calculator will give an estimate straight away, but a more accurate figure requires a professional valuation to be done. We can arrange this to e carried out within a few days.
Furthermore we can make the process of applying for a lease extension simple and efficient. Contact our lease extension team straight away, and they will be able to explain the process and give you a competitive quote for our s step method to extending your lease.