Whether you own a flat with a long lease as your home, or as a buy-to-let investment, it is important to keep an eye on the length of term remaining.A long residential lease is a valuable but a “wasting” asset. As the remaining term of the lease decreases over time so does the property decrease in value.
Long leaseholders are entitled by law (under the Leasehold Reform Housing and Urban Redevelopment Act 1993) to have the term of their lease extended by 90 years with a peppercorn ground rent.
If there are 80 years or fewer remaining from the original term, we recommend getting the lease extended. Once the remaining term of the lease dips below 80 years, the premium to be paid to the landlord for an extension increases. This is because at that point the landlord becomes entitled to 50% of any additional value in the property which results from the merging of the old and the new leases. This is known as the ‘marriage value’, which is not applied to premiums to be paid when there are more than 80 years left to run on the old lease.
If there are fewer than 70 years remaining on the term of the lease, many lenders will not offer a mortgage, which will make the property more difficult to sell.
Leases can be extended either by informal negotiations with the landlord direct or by the leaseholder following the statutory procedure to claim an extended lease.
Whether you are a landlord or freeholder responding to a leaseholder’s claim for an extended lease, or a leaseholder wanting to make a claim, Pinney Talfourd is well placed to act for you. The statutory procedure is fraught with difficulties as there are strict deadlines and time-frames to observe. Judith Winward, assisted by members of our Residential Property Team, specialises in statutory lease extensions and regularly acts for both landlord and leaseholders.
We can deal with the whole process – from the initial notice to trigger a claim by a leaseholder under the statutory procedure, to the landlord’s counter notice, liaising with valuers on the negotiations for the premium, and completing the new lease or, in the event of a dispute, dealing with any application to the First Tier Property Tribunal.
If you would like to talk to Judith Winward in a Free initial telephone consultation please contact her on 01277 211755.
This article was written by Judith Winward, Solicitor in our Litigation team. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at Aug 2014.