subject: The True Cost Of Delaying Your Lease Extension [print this page] It is easy to see why extending a lease is not at the forefront of most people's minds. Many leases are granted for 99 to 125 years and therefore an extension can often seem pointless.
However, this is a big mistake. If you live in a flat or other leasehold property, the length of the lease is something that affects you right now, not decades into the future. In fact there are 3 major reasons why you should be looking to extending that lease now rather than later.
1. Short leases affect the value of your property
Although there are no hard and fast rules, a property on a short lease will almost certainly be worth less than a property that has more years left to run on the leasehold. This is just common sense. Although there are exceptions, as a general rule, the value of your property will be closer to the freehold value the closer you are to the maximum lease limit.
2. Short leases affect the saleability of your property
If you had two identical properties to choose from, which would you choose? One that you could then feel protected and reside in for a long period of time ? Or one that required time, money and effort to stop it reverting back to the freeholder? Hopefully the answer will be obvious! It stands to reason that potential buyers are very disinclined to purchase properties with a short lease.
Something else to bear in mind is that, outside property hot spots such as Central London, most lenders are unlikely to offer mortgages for properties on a short lease. Generally speaking, they will specify a minimum length for the lease, typically 30 years from the end of the mortgage period. So even if a buyer wants to buy your property, they may be unable to do so, leaving you with a devalued property that you can't sell - a property that is effectively worth nothing at all.
3. Short leases are less beneficial in the future!
As if the above reasons weren't compelling enough, if your leasehold term has dipped below 80 years, you become liable for the so-called "marriage value" - a figure that's calculated by deducting the value of the property before the extension from the value afterwards, plus the landlord's interest. The longer you delay in extending the lease the closer you creep towards the 80 year deadline, where an extension will cost you a lot more money.
So there are three very good practical and economic reasons for extending a lease as soon as you possibly can. Although the process may seem daunting, it doesn't have to be. A solicitor specializing in the complex area of extending a lease can handle the legal side of lease extensions for you, from preparing the application to serving notices on the freeholder. Although you may be faced with an initial cost, see it as an investment which will eventually improve the saleability and overall value of your property.
