subject: Ticking A Lot Of Boxes With A Leasehold Extension [print this page] Are you aware of how long there is left on the term of your lease? Do you also understand the implications of the lease term dropping below 80 years?
In a worst case scenario, if your lease runs out entirely, you will experience the acute loss of security associated with becoming an assured tenant who has no lease to sell and no option of applying for a lease extension under the Leasehold, Housing and Urban Development Act 1993 (as amended). Even if your lease has far more years to run than your most optimistic life expectancy and you suppose that you will be dead and gone or long since moved out before it expires you should still seriously consider extending it. You probably will predecease your existing lease, however there is a high probability that any ambitions you have to move into another property will be far more difficult to achieve than might need have been the case if you had an extended lease, because properties with leases of between ninety and ninety five years and certainly those with a little over 80 years to run prove very difficult to sell.
Buyers are reluctant to buy such a property because:
It will be they, the new owner, who will have to undertake the potentially costly and rigorous process of applying for a leasehold extension in order to add value to their property.
Lenders are increasingly stipulating in mortgage agreements that the lease has to have a minimum remaining duration of at least 70 years plus before they will lend to buyers and this minimum period has been steadily increasing over the past few years and can be anticipated to rise further. The greater the additional duration of leasehold over that minimum70 years, the greater is the likelihood of a mortgage being offered and the more valuable your property will become as a saleable asset.
As time passes by and by you ignoring the ever increasing need for a lease extension, your chances of selling your property at all and certainly at the price you might have hoped it would achieve diminish.
Applying for a lease extension well before its remaining duration drops below 80 years will prevent you having to pay what is termed the 'marriage value'. If the remaining period of your lease does drop below 80 years, your landlord/freeholder can demand a potentially considerable additional premium from you, the marriage value, based an essentially subjective valuation, when you apply for your lease extension.
If you wait to apply for your lease extension until the lease has just over eighty years to run, it has not been unknown for unscrupulous landlords to protract lease extension negotiations until the duration of the lease reduces to fewer than eighty years and the marriage value thus becomes operative to your pecuniary disadvantage. Engaging the services of a specialist solicitor will allow you to avoid this costly eventuality and other potential pitfalls in the process. If your property was built during the 1980s or 90s it was probably granted a 99 year lease (most were) and the eighty year alarm call for applying for your leasehold extension will now be requiring serious consideration.
