Your lease is a depreciating asset that loses value as the number of years remaining falls. The shorter the lease, the harder your flat will be to sell or mortgage, thus jeopardising your investment.
It is therefore very important to think about extending your lease and to do so early on as the cost involved in extending it will increase over time. In particular, if your lease falls below 80 years, an additional sum known as ‘marriage value’ is applied, which significantly increases the premium payable to your landlord.
Do I qualify?
If you own a flat in England and Wales, you are likely to be a “leaseholder”, which means that you have bought a lease of the flat instead of owning it outright/forever.
A “lease” is the contract you purchase which gives you the right to occupy the flat for a number of years; usually between 99 and 125 years. The person who grants you this right is your “landlord” and is often, although not necessarily, the freeholder of the building, i.e. the person who owns the land outright/forever.
The Leasehold Reform Housing and Urban Development Act 1993 (‘the Act’) gives leaseholders the right to force their landlords to extend their leases provided they qualify and follow the legal process set out in the Act.
What am I entitled to?
You are likely to qualify for a statutory lease extension if you have owned your flat for more than two years (there is no need for you to live there) and the lease was originally granted for at least 21 years.
If you qualify under the Act, you will be entitled to extend your lease by an extra 90 years on top of the current unexpired terms whether or not your landlord consents to it. An added benefit is the ground rent will be reduced to a peppercorn (£nil) from the date of completion, which is particularly attractive if you have onerous ground rent provisions in your lease.
If you have owned your flat for less than two years, you may still be able to extend your lease by agreeing a voluntary deal with your landlord. However, you will not be able to force the deal through as you would with the statutory process.
If you are looking to buy a flat with a short lease, the seller may start the statutory process for you and can then assign the right to you upon your purchase of the property, thereby circumventing the two-year ownership requirement.
Make a free enquiry with Naylor Solicitors
As there are many pitfalls to avoid in order to successfully exercise your statutory right, we strongly advise you to instruct a specialist solicitor and valuer to help you.
Naylor Solicitors LLP are specialists with years of experience when it comes to lease extensions, both on a statutory and voluntary basis. We strive to provide a pragmatic and transparent approach to our clients and make the lease extension process as effortless as possible.
We offer a free telephone consultation should you have any queries or simply want to obtain our fixed fee quote.