Short lease and property value – are they connected?
Will having a short leasehold term affect the sale of your property. The answer is simple – there is a strong connection.
The fact that a lease is relatively short does not, in principle, stop any sale of the property going through, but it will inevitably have a significant effect on the overall value of your property, and may, in addition, make your flat much harder to sell. So extending your lease makes sound commercial sense.
Looking for Specialist Lease Extension Advice? Call our Specialist Solicitors on FREEPHONE 0800 1404544 for FREE Initial Phone Advice.
If I purchase a flat with a short lease attached will I have to wait 2 years before I can obtain an extension?
Broadly yes – you do need to years ownership in normal circumstances before applying for a statutory leasehold extension – though there is no requirement that you ever lived in the flat.
However, if the person who sold you the property had already applied for lease extension and assigned, as part of the cell documentation, that right to you, then you can immediately apply to extend the lease without having to wait that two-year period.
Probate sales – will I still have to wait for two years?
If the property is part of the estate of someone who was recently died, the beneficiary does not need to wait for that two-year period, provided that the executors make an application for a statutory lease extension within two years of the date of grant of probate [provided that the deceased person must have qualified for that lease extension themselves – including having been the owner of the property themselves for at least two years.]
I haven’t lived in my flat during the past two years; do I still qualify for an extension?
As long as you have owned the lease for two years or more then there is no legal reason as to why you can’t serve a notice of extension.
I’m having a hard time finding my freeholder – is it possible for me to extend my lease without them?
It’s not unknown for freeholders to have gone AWOL – and for leaseholders to be unable to track them down. This, however, is no reason to deny your lease extension – and the usual course is to apply to the county court fought is known as a vesting order. However, obtaining a vesting order is not entirely easy and there are plenty of hurdles that need jumping in order to get one. In particular, the county court must be satisfied that you have done all you can to serve notice to your freeholder, so expect them to ask for proof of the following:
• Attempts to serve notice of claim to either the freeholder’s last known or currently listed address.
• Attempts to serve notice via the local gazette or newspaper, thus putting out the request in the public domain.
• Use of the land registry to try to locate a means of contact with the freeholder or to see if they have moved address.
• A physical attempt to visit the freeholder’s last listed address while obtaining witness reports to confirm that the freeholder no longer resides there.
If you can satisfy the County Court of these kind of reasonable attempts to trace the missing freeholder, then they should grant your request to do away with the need for service of the lease extension notice on your freeholder due in your particular circumstances.
Once you’ve been granted a vesting order by the country court, they will more than likely transfer your application to the First Tier Tribunal (Property Chamber) – previously the Leasehold Valuation Tribunal or LVT. The FTT will then consider your case and determine the premium of the extension and can grant your lease extension with or without the freeholder’s input.
What needs to be included as part of a tenant’s notice of extension?
There are several elements to a notice of extension and every leaseholder should file one that includes all of the following.
• Name of leaseholder
• Name of freeholder
• Property address
• Lease details (including general conditions and start date)
• The amount of the lease extension premium being offered, along with other costs involved with the lease.
• Any amendments that the leaseholder wishes to propose to the current terms of the lease.
• Name and contact of both the leaseholders and freeholders representatives.
• A deadline in which the freehold must respond by in either acceptance, rejection of counter offer. Such date must be two months or more from when the leaseholder has issued notice of extension.
Is an independent formal valuation compulsory?
It isn’t a legal requirement, but in our opinion, any leaseholder would be making a serious mistake in going ahead with a lease extension without getting an accurate valuation from a specialist surveyor.
Heading into negotiations using an out of date valuation or without any type of valuation, means that you will have little idea of an accurate valuation of the price you will need to pay for your lease extension. A number of factors are included in the statutory formulation of the premium, and it’s likely that your freeholder will have a better idea of the value the new – almost certainly have his own specialist advisers. Going ahead, therefore, without an idea of the right means you could well be paying more than you need to in extending your lease.
What is “marriage value”?
When looking at extending your lease, it’s important you know about marriage value. The marriage value is a one off additional payment that the leaseholder is required to pay in extending a lease with a term of less than 80 years – and watch out, because marriage value kicks in fully when your lease drops just one day below that critical 80 year period. Even in a relatively straightforward and inexpensive lease extension, having to pay marriage value is likely to add thousands to the premium you are required to pay your freeholder.
Remember, you only need to pay a marriage value when your lease term drops under 80 years. Sensible leaseholders will make sure that an extension is addressed long before that point.
I have found a flat with a really short lease. How can I fund the purchase?
When it comes to short lease flats, an increasing number of lenders are unwilling to provide a mortgage.
85 years left in the mortgage – no problem at all.
65 years or less? A very different story.
One answer to buying a bargain short lease flat is to buy with cash and then extend the lease. However most prospective purchasers don’t have the ready cash available.
However there is another alternative. We work with a financial advice business who provide specialist bridging finance for buying and extending short lease flats. Unlike most financial advisers, they really understand lease extension and a short lease market.
Being bridging, of course, the short term interest rate is higher than a long-term mortgage, but provided the purchase meets their lending criteria, it could allow you to buy that short lease flat and provide the finance for the lease extension. You are then free to either hold the flat, which effectively you have bought at what could be a substantial discount or sell it at a profit.
If you would like an introduction to our bridging loan contact – just ask our team.
Considering Leasehold Extension? Contact our Specialist Solicitors
Here at Bonallack and Bishop, we have a team of expert Leasehold Enfranchisement and Lease Extension Solicitors and can advise you wherever you live.
We offer coverage nationwide – so for FREE initial telephone advice just
- FREEPHONE 0800 1404544
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