Here are some frequently asked questions to assist you:
Can I Extend my Lease?
Yes, if you can agree the price/premium and terms with your landlord. This is usually the cheapest option. If this can’t be agreed then you have to consider exercising your statutory right. To qualify you need to have owned your lease continuously for at least 2 years which allows you to renew your lease on the following terms:
a) An extension of 90 years on top of the remaining lease term.
b) The ground rent reduced to nil (also known as a peppercorn rent).>/p>
What do I do to start the process?
Write to your landlord and ask for a lease extension. You can use our online lease extension calculator to estimate the premium for a statutory lease extension. This calculation should not remove the need to instruct an experienced surveyor for an accurate valuation. If the notice you serve on your landlord contains an unrealistic figure then the notice is deemed to be invalid, which means you will have to serve another notice. Where time is of the essence and the lease term is low (approaching the 80 year mark or well below this) a delay in having to serve another notice may increase the price of a lease extension for a leaseholder.
Is there a deadline I need to be careful of?
Once your lease drops below 80 years you will pay an additional sum to the market value. This sum is called the marriage value. Once the term drops below 80 years the premium begins to increase at a greater rate.
Do I have to pay for the landlord’s fees?
The leaseholder is expected to pay the landlord’s reasonable legal and surveyor’s fees and disbursements. If the leaseholder pulls out half way during a statutory lease extension the leaseholder is responsible to bear the landlord’s reasonable costs and is prevented from exercising the right to extend for 12 months during which time the price of extending the lease is likely to increase.
What if I don’t extend?
You may eventually breach your mortgage conditions. Lenders have their minimum lease term requirements. Barclays Bank require a mortgage term plus 25 years whilst Birmingham Midshires requires a minimum of 70 years from the date of the mortgage.
Part 2 of The Council of Mortgage Lenders Handbook https://www.cml.org.uk/cml/handbook provides the requirements of each lender.
As the lease term drops it may impact the sale price of your property especially if the lease term is nearing or below the 80 year mark. To ensure that you avoid the many pitfalls that surround this area of law we recommend that you take note of this piece and make sure that you instruct solicitors and surveyors that are experienced in this field.
Please do not hesitate to contact our property team who are experienced to discuss the above including related topics such as purchasing the freehold of your building or setting up Right to Manage Companies.