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News

When to apply for a Lease Extension on your Home

Tuesday, February 2, 2016 By Chris Halls FRICS

The principle of a Statutory Right for a Lease Extension on a property with a short unexpired term is now well established, but if you are in such a position, at what point should you start the process.

The Act provides you are entitled to apply for an additional 90 years to be added to the current unexpired term. To qualify, you have to have owned the property for 2 years, however, if you are buying or selling a property with a short lease, there are provisions whereby the right can be claimed by the current owner (providing they qualify) and that right can be transferred to a new owner, thereby avoiding the two-year ownership requirement.

Leases with less than 80 years left will often be considered as unacceptable security by Mortgage providers and for terms below 80 years unexpired, the cost of negotiating a lease extension starts to become more expensive the shorter the unexpired term becomes. Most importantly however is the fact that if you extend your Lease before the term falls below 80 years unexpired, then you do not have to allow for the payment of "Marriage Value" as part of the premium you will have to pay for the Lease Extension.

There are financial benefits therefore in seeking to extend your lease before it falls below 80 years unexpired. Furthermore, if you are looking to sell or refinance your property, and it has a short Lease, it's better to consider this at an early stage rather than being in the weaker position of not having sufficient time to exercise Statutory Rights and maybe having to accept a Freeholders requirements for the amount of premium and other terms, so as not to loose a purchaser or a refinancing offer.

If you wish to discuss your requirements or need advise in this respect please contact either Christopher Halls FRICS or Robert Paine MRICS. who are both RICS Registered Valuers for free initial advice