We recently had a number of enquires regarding extending the leases on leasehold properties. It’s an area of information that while not relevant for all those buying homes, a significant chunk of flats, in fact over 5 million UK properties fall into this category, and no doubt in searching for a property a number of leaseholds will show up – if you don’t know what a leasehold means or why it could matter, let me point out some of the key information that matters for you.
The most important point, and therefore the point I will make first of all, is that if you are a leaseholder, do not let your lease fall below 80 years. If you are concerned that this may be the case, you should act quickly, as the cost of extending a lease ramps up rapidly as time passes.
Not only does the cost of extending increase as your lease shortens, but the value of your home also declines. Homes with a shorter lease are more difficult to market, are perceived as less secure, and become trickier to mortgage. As a general guide, around 70 years is the point at which lenders tend to get squeamish about leaseholds – making it incredibly difficult to sell – except to a rare cash buyer, who is likely to recognise their position and make a lower offer as a result of the short life lease!
If you’re a potential buyer, it’s worth noting that you will be unable to extend your lease until you have owned the property for two years – so be careful if you’ve been promised that an extension will be simple or easily obtained.
When extending a lease, the normal practice is to extend by 90 years – so it’s likely to be a one-off, again a reason why this may have not been on your radar until now. The first step is to find a solicitor, obtain a valuation of the property and then negotiate a price with the freeholder. Extending a lease can be costly, but usually the potential value added to the house is more than that spent, and the costs of not doing so are far greater!
If you need any help with this process, please just give us a shout!