“The value of a leasehold property falls as the term of the lease reduces,” says Fiona McIntosh property partner at solicitors Cripps Harries Hall. “Below 70 years the reduction is significant and it becomes much harder to obtain a mortgage. The knock-on effect is that it becomes harder to sell.”
The price you pay the freeholder to extend the lease is based on the value of the property. If the flat is now worth 20 per cent less than a couple of years ago, you will pay 20 per cent less to extend the lease. When the market improves, if you sell, you should get your money back — or more.
“If you have between 80 and 85 years left on your lease, take action now to extend it,” says McIntosh.
“Extending it after the remaining period falls below 80 years is more expensive because you are affected by “marriage value”.
What will it cost?
Extending the lease for another 90 years on a flat valued today at £330,000 with 74 years remaining on a 99-year lease, would cost £12,000 to £16,000, plus costs. This is more expensive than if there is more than 80 years remaining because it takes into account the “marriage value”. You can get a rough estimate of costs at www.lease-advice.org.
As long as you have owned, but not necessarily lived in, your property for at least two years, most leaseholders have a right to extend their lease for 90 years, in addition to the unexpired term, at a peppercorn, or zero, ground rent, unless the lease was original granted for less than 21 years.
For those buying a leasehold property, the price you pay should take into account the length of the remaining lease. If it is under 70 years you can negotiate to have the cost of extending it knocked off the asking price.
For advice, call Fiona McIntosh on 01892 506125, or email firstname.lastname@example.org.