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Long leaseholds are typically 99 years, 125 years or 999 years. If you have a 99 year or 125 year lease it may be time to seriously  start thinking about a lease extension.

Why?

A lease provides the right to occupy a flat (or house) for a fixed term as a Leaseholder. The Freeholder retains ownership of the building and typically you’ll pay them an annual ground rent, the amount of which is laid down in your lease. This has a drawback in that the fewer the number of years that remain on the lease the less valuable the flat becomes. The law recognises this fact and gives the leaseholder the right to extend their lease by an additional 90 years once they have owned it for two years. 

Theoretically when the lease term expires you are expected to hand the property back to the freeholder – despite having paid the mortgage. But you can legally extend your lease for an additional 90 years and also wipe out the ground rent payments entirely.

On the plus side you gain an extra 90 years, hence a lease with 75 years remaining becomes a 165 year lease. However, in return you must pay the Freeholder compensation, known as a premium (the price).

My lease has at least 80 years to run…

We would still suggest getting advice on this as if your lease has at least 80 years to run then you will pay the premium to extend by another 90 years and the ground rent will be reduced to peppercorn levels. You will also not need to pay a Marriage Value (see below).

My lease has less than 80 years to run…

If on the other hand your lease has less than 80 years to run you must pay the Freeholder an additional sum termed Marriage Value – which is the value created by merging the freehold and leasehold interests in an extended lease. The Freeholder is entitled to 50% of this amount, normally a considerable sum.

Each further year the lease falls beneath 80 years the premium payable becomes disproportionally higher.

Why Should I Extend My Lease?

Sooner or later you’ll need to extend your lease; perhaps to sell or to re-mortgage your property. Flats and houses with leases less than 80 years will prove difficult to sell as mortgage companies are reluctant to lend against such short assets. Once the lease falls to 65 years the only realistic buyers are cash buyers and with fewer buyers in the market the price ultimately falls.

How Much Will A Lease Extension Cost Me?

This depends on how long is left on the lease, the ground rent payable and the value of your property. At Coupe Property Consultants we specialise in providing clear and affordable advice on the premium and even negotiate the new lease terms with your Freeholder if you wish.

For a free, no obligation, chat on the process and costs involved please contact Coupe Property Consultants on 0117 959 6487 and ask for Johanne Coupe or email This email address is being protected from spambots. You need JavaScript enabled to view it. and she’ll be happy to assist.

Alternatively further information can be found on our website: www.coupepc.co.uk

In short the sooner you extend your lease, the less it will cost. Even if you have over 90 years remaining, by deciding to extend now could have considerable savings in the future.

 

Article provided by

Johanne Coupe, FRICS

Trym Lodge, 1 Henbury Road, Westbury-on-Trym, BS9 3HQ

T: 0117 959 6487

 Surveyors throughout Bristol & the South West