Lease Extension - Why Delay Costs

Lease Extension - Why Delay Costs

Lease Extension - Why Delay Costs

Many leaseholders were granted their original lease for at least 99-125 years and therefore believe that they are secure in their property without having to think about getting an extension. This is not the case, not getting an extension in many circumstances is a bad financial move.Equally, property owners may be worried about the cost of following the lease extension process. Whilst this reaction is understandable, it's also a serious mistake. Delaying lease extension can end up costing far more in the long run.To start with it is important to know that security is not always guarenteed with an apparently long lease, you should always be aware of an extension. You'll already be part of the way through it by the time you buy the property - perhaps even a considerable way through it. Time can run on surprisingly quickly, and every day that passes reduces the term still further.But why should this matter? The main reason is financial. Properties on a short or dwindling lease term are worth much less than properties on a longer term, for the simple reason that they're harder to sell. Mortgagors see shorter leases as carrying more risk and purchasers will want to buy a longer lease for greater security - a "perfect storm" of reluctant buyers and lenders. Unless you have the good fortune to live in a property hot spot, your lease term directly affects the value of your property. To protect your own investment, it's imperative that you have as long a lease as possible.This becomes even more urgent when you take the "marriage value" into consideration. This little known aspect of residential leasehold law is a financial time-bomb. If the remainder of the term is less than 80 years, then the landlord can claim the marriage value, which is 50% of the potential increase in the valuation of the property if an extension is given. Or to put it another way, you will be liable to pay the landlord a sum based upon an imaginary sale. This will inevitably make the process cost more. It also means that you have less time than you think to make a decision about extending your lease.The good news is that lease extension isn't nearly as overwhelming or complicated as you might think. Most leaseholders do have the oppportunity of extending their lease by a further 90 years. A good way to do this is by using a professional solicitor and valuer. These specialists will take care of all landlord negotiations, acting on your behalf.The main thing to remember is that whilst there is certainly a cost involved with extending leases, this can be effectively reduced by moving fast. The end result will be an increase in the value of your property, and far greater peace of mind.

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