Lease Extension - A Detailed Outlook
Introduction:
Introduction:
Leasehold is a form of property tenure where one can buy the right to occupy land, building, a flat or a house for a given length of time. The person or party that occupies this property is called the lessee or the leaseholder.
A leasehold property can be bought and sold on the open market during the lease term, as it is a legal estate. Lease differs from a tenancy where a property is rented on a periodic basis usually monthly.
Need for lease extension:
The leaseholder is given the right to occupy for a certain period of time which is usually 50-100 years. But when this lease term starts to expire, the problem begins. At this point of time, the value of the property starts reducing. A property usually a flat that has a small lease period left is not really saleable as the lease extension prices/ cost of purchasing the lease extension increase at this stage. Mortgage lenders also become unwilling to lend flats with shorter leases. Same applies for residential lease extension.
So, here comes the reason to extend your lease. If you are a leaseholder and your lease term is fast expiring, t hen its time to act now. Once you have acquired the right to purchase the lease extension, you are more likely to fetch the right market value for your flat and make it highly saleable during your long lease period.
Eligibility for purchasing the lease:
Now, first you have to qualify certain conditions in order to claim your right to purchase the
lease extensionSome of the conditions that you need to fulfill are:
1. You must be the tenant/leaseholder of the flat for which you are holding the lease. That is, your lease period should be in excess of 21 years from the original term.
2. Secondly, you must be the owner of the lease for at least two years before the date of the claim.
No matter, how many flats you have leased.
If you satisfy these conditions, you can acquire a new lease term wherein the extended lease term can be for 90 years counted after the end of the current term, keeping your ground rent the same throughout the term. In fact there is the added bonus that you will not have to pay any more ground rent at all, either during the original term or the subsequent 90 years.
Lease Extension Prices:
To purchase a lease extension, you need to be aware of the right value of your flat.
For a fair idea, you can estimate by summarizing this way:
It will be compensation for loss of ground rent income to be paid under the current lease, together with the loss of the right to receive the value of the flat at the end of the current lease.
Or in other words, it is the difference between the value of landlord's interest under the present lease and the value of interest after the grant of new lease with the additional 90 years. Landlord is also entitled to receive a share of marriage value (a hidden value indicating the increase of property's value as a result of grant of new lease).
Although, it gives a simple understanding, calculating the actual value can be
quite complicated. The price offered by the landlord can be excessive. Here you need a specialist valuer who can help you buy the extension for the correct price. Not only this, you have to be following the due legal formalities needed for the procedure.
Approaching a professional will ensure that you pay a fair price for your lease extension and you will also be guided systematically through the process of conclusion.
by: Nick
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