5 reasons leaseholders should look to extend their lease
If you’re a leaseholder, the clock is always ticking. But the power is in your hands. Let’s find out more.
Most flats (and some houses) are leasehold properties. If you buy a leasehold property, you only own the right to live there. The bricks and mortar, as well as any associated land on the property, belong to someone else - the freeholder. What’s more, you only have the right to the property for the time left on the lease. Once that time runs out, the ownership reverts back to the freeholder.
If you’re a leaseholder and the time on your lease runs down too low (80 years at the very least), it can cause several problems going forward. Fortunately, it’s possible to extend your lease and safeguard your property purchase. In this article, we’ll look at five reasons you should consider extending your lease sooner rather than later.
1 - A longer lease makes your property easier to sell
While you may be happy in your leasehold property right now, you may not want to live there forever. There will come a time when you may want to sell it.
If the time on your lease goes below 85-90 years, buyers become hesitant to purchase. In addition, mortgage lenders are reluctant to lend buyers money to buy properties with shorter lease times. Some refuse to lend at all on leases with less than 75 years left to run. This means fewer people will be interested in buying your property.
2 - Extending your lease raises your property’s value
Because fewer buyers will consider purchasing your property if the time on the lease is short, you may find yourself forced to accept a lower offer than the one you wanted when you go to sell.
On the other hand, a leasehold property with 120+ years left to run is more of an asset and you can value your property accordingly.
3 - Because the longer you leave it, the more it costs
The longer you wait to extend your lease, the more expensive it will be. This could be because the freeholder knows the desperate situation that you’re in, and can charge you a high price to solve your problem.
However, if you let your lease go below 80 years without extending, things get even more costly. When you reach this point, the freeholder is entitled to a ‘marriage value’ payment. This means that if you extend your lease, you must pay 50% of any increase in your property’s value due to the lease extension back to the freeholder.
If you’re close to that all-important 80-year number on your lease, you must take action now.
4 - Because you can
The good news is, your freeholder cannot refuse your request to extend the lease, provided you’ve owned the property for two years or more. It’s statutory law.
You’ll still have to negotiate a price with the freeholder, but eventually, you’ll come to an agreement, even if you need to go to a tribunal for a final decision.
5 - Because it’s simple (with the right help)
Extending your lease is not a complex process. Your role is to inform your freeholder, get a valuation on your property, then negotiate a price that suits you and the freeholder. The entire lease extension process typically takes between 3-12 months.
However, it’s essential that you have an experienced property law solicitor in your corner as you arrange your lease extension. Extending your lease takes quite a lot of legal work, including dealing with the Land Registry. If you experience any problems during your lease extension, such as having to go to a tribunal to settle your price, having a good solicitor on your side will be worth its weight in gold.
Find out more from Couchman Hanson
At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.
Call 01428 774756 or visit couchmanhanson.co.uk