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Believe it or not we get consulted by flat owners on a reasonably frequent basis, who are worried about this problem.
As a long leaseholder, you should be keeping an eye on the term of your lease.
The Leasehold, Reform Housing and Urban Development Act 1993 (“the 1993 Act”) gives long leaseholders who have been long leaseholders of their property for at least two years, a right to claim a lease extension of an additional 90 years at a peppercorn ground rent. The 1993 Act has not been altered in light of Covid-19 unlike some statute. This therefore means that the term of your lease will continue to tick down and be at risk of dipping below the 80 years.
Ninety-nine years may seem like a long time, but in reality, when a term falls below 80 years, it can become more expensive to extend the lease.
You may wonder why you would want to consider extending the lease at all. Quite simply, it can more difficult to get a mortgage over a leasehold property where the lease has less than 80 years left. Lenders aren’t so keen to lend so you may lose out on a potential sale if the proposed buyer would need a mortgage.
However, when the term slips below 80 years, another factor has to be taken into account known as “marriage value”. This has a significant impact on the premium, and not in a positive way for leaseholders, which is why it is more favourable to extend the lease before it slips below 80 years.
The calculation of the premium (the price that is paid to the landlord for extending the lease) is carried out by a surveyor and is based on many factors specific to your property. We work with the surveyor during the lease extension process. We would suggest that the first step you take is to obtain the valuation from your surveyor as this will give you the best idea of what you can expect to pay by way of the premium.
Whilst as lawyers we will prepare the relevant notice and begin the process and negotiate the terms of the lease on your behalf, your surveyor will negotiate the premium.
If you have not owned your property for two years, although you will not have a right under the 1993 Act to extend your lease, you may be able to still ask your landlord for a lease extension.
If you are looking to extend your lease and would like to discuss it further, please contact me on:-
Tel: 01295 661458
Mobile: 07805 823764
Dani Green is a Senior Associate at Brethertons within the Residential Leasehold Team. Dani has worked within the leasehold property sector since 2011 and qualified as a Solicitor in 2016.