Extending your residential property lease will cost you – so how do the benefits stack up?
There is usually a price to pay for extending the term of a lease – so what makes a lease extension an attractive proposition for owners of leasehold residential property?
Well, for starters, as the length of the remaining term decreases so does the value of the lease. Furthermore, if you are planning to sell or take out a mortgage on the property, you or your potential buyer may have difficulty securing a loan unless the lease has upwards of 55 years left to run – many lenders require the lease term to be at least 30 years greater than the life of the proposed mortgage, while some lenders ask for a term of 70 years or more.
In order to qualify to extend your lease under the statutory procedure, you must have owned your property for two years; if your application is successful you will be granted a further 90 years plus the remainder of the term of the current lease.
It is best to increase your lease term early on because if the lease has 80 years or more still to run at the time of your application you will not have to pay a sum of money, or ‘marriage value’, to the landlord when you seek the extension.
To get the process started, you should serve a ‘notice’ on the landlord and, because this notice must include certain specific information, it is always wise to instruct an expert to assist you with this.
If you are planning to sell your property and have concerns that the lease term will discourage potential buyers, as long as you have already served a claim notice it may be possible to transfer to your buyer the right to seek an extension without their having to wait two years before becoming eligible to seek the extension.
An alternative to the statutory procedure is simply to agree an extension informally with your landlord and, provided you have taken reliable professional advice on how much premium you should pay and you can agree an amount with your landlord, this method has several advantages. Not only is it usually quicker, but very often it is also less expensive in legal fees and survey costs than choosing the statutory procedure route.
If you need further information on residential property law or you would like us to provide you with a quote for your lease extension work, please contact the George Ide team on 01243 786668 or by email at firstname.lastname@example.org.Business, General, George Ide, News, Residential Property Conveyancing