The negative stance of most mortgage companies regarding funding investment into properties with a short lease creates great difficulties for investors and apartment owners alike, who find their property declining in both value and saleability. If purchasers cannot secure the funding they need, they simply cannot buy and too many leasehold owners don’t realise the affect of short leases before it’s too late.
In many cases, 80 years is the cut off point meaning that the problem is particularly prevalent now and will be in the coming years. The housing booms of the 1980’s and 90’s, combined with the architectural and policy tendencies at the time, resulted in numerous flats and apartment towers conveyed with 99-year leases.
Now 20-30 years on, these leases are short enough to put off buyers and lenders alike. If you own the lease on a property of this era and time is running out, it is advisable to seek legal advice on extending that lease to ensure you can successfully move on when you are ready. Fortunately, conveyancers have now learned and the modern consensus is for 999 or 125 year leases, or for the freehold of the building to be vested in a management company which is owned by the leaseholders.
Provided you have owned the flat for at least 2 years you will have the legal right to extend your lease by 90 years through the ‘Individual Lease Extension’ procedure. Under this procedure, the lease can be extended in return for the payment of a premium to the landlord, but it is important to note that after the lease has fallen to 80 years, that premium will begin to rise.
There are two important matters to take note of regarding the process.
– Firstly, the leaseholder will need to procure a valuation, independent of that the freeholder will provide, to form the guide price and basis for negotiation. This needs to be from a qualified professional in order to ensure accuracy and credibility.
– Secondly, lease extensions can frequently be agreed on the basis of this valuation without the legal rigmoral and costs involved in delivering formal notices. The second thing to do when looking to extend your lease, after the valuation, should be to approach the freeholder directly and attempt to reach a genial settlement.
Too many leaseholders are unaware of the status of their lease and the possible ramifications. If you are a leaseholder, ensure you check how many years remain on the lease. If it is nearing 80, or even less, obtain legal advice regarding extending your lease as soon as possible.
Leasehold extension or enfranchisement valuations can be undertaken by members of the PropertySurveying.co.uk network whose details can be found here: www.propertysurveying.co.uk