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Do you own a leasehold property? If so, do you know the details of when and how you are able to extend your lease, or why it's important to do so?
Do you need a lease extension?
Under the 1993 Leasehold Reform Act, most flat-owners are legally entitled to have 90 years added to their lease at a fair market price. In a nutshell, to be legally entitled to extend, you need to have owned the flat for at least two years. You don’t need to have lived there, just owned it.
Why does it matter?
There are many factors that may deter you from extending the lease or make you think it’s not a problem. Perhaps you don’t want the expense of extending the lease, especially when you’re already getting a steady rental income from the property. You might be intending to sell it soon. You might even enjoy living in it or intend to keep the property for the rest of your life and bequeath it in your will. However, a flat with a lease length of close to 80 years or less will continue to lose value as the lease shortens.
What happens when leases have less than 80 years left?
Once the lease of your flat falls below 80 years, even by a few days, the cost of a lease extension will considerably increase rapidly due to a concept known as ‘Marriage Value’. The later you leave it after the 80-year watershed, the greater the cost of a lease extension.
What is marriage value?
Marriage value is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the longer lease. However, no marriage value is payable where the lease exceeds 80 years.
If your lease has less than 80 years left remaining you can still extend your lease taking marriage value into consideration. You and your landlord will take a 50:50 split of the marriage value total.
What are the difficulties of selling medium or short term leases?
A property with a lease of less than 80 years will be harder to sell. Many potential buyers will not wish to incur the costs and uncertainties associated with extending your lease. And mortgage lenders are
reluctant to fund properties with shorter leases.
What happens when you extend your lease extension?
A notice of claim is served upon the landlord. The premium price of the lease extension is agreed or determined with the assistance of expert valuers, if the landlord accepts the claim. In addition, should premium values not be agreed, a leaseholder can make an application to the tribunal for a fair determination.
What do you get included in a lease extension?
By law you are entitled to:
- A 90-year lease extension on top of the years left remaining on your lease; and
- Ground rent becomes a peppercorn rent (i.e. nil, or a very low rent); and
- The same terms as your current lease.
You cannot extend a lease if:
- Your landlord is a charitable housing trust;
- Your property is owned by the national trust;
- You are under the terms of a commercial lease;
- You are a tenant of the crown.
A landlord may not grant a lease extension should:
- The landlord consider your notice of claim to be technically invalid;
- Your lease expires within 5 years of the date of the notice of claim;
- The landlord intends to demolish, reconstruct or carry out substantial construction works on the whole or substantial part of the premises;
- The landlord needs possession in order to carry out such works.
What if you do not know the landlord?
If you are unsure of the identity of your landlord (for example you may have bought a flat at auction which was sold by a mortgage company), or your landlord is missing, you can still apply to the court for a lease extension.
How can we help you?
With property solicitors across Hampshire and Dorset, our team are on hand to assist with any matters regarding your lease extension. If you require a straight forward lease extension, our legal fees are £1,950 + VAT. If Tribunal work is required, additional fee estimates will be provided. Group discounts may be available for 3 or more parties.