What is the issue?
A recent report issued by the HomeOwners Alliance has estimated that 42% of leaseholders do not know the length of time remaining on their lease. Of those that do, almost a quarter of leases are under 80 years (around 370,000 homes). As such, the cost of extending these leasehold interests is expected to exceed £4 billion.
When do I need to consider extending my lease?
Where possible, an owner of a flat should avoid letting the term of their lease fall below 80 years, as it becomes more expensive to extend the lease after that time due to “marriage value”.
What is “Marriage Value”?
After 80 years, the landlord is entitled to half of the increase in the value of the flat arising from the lease extension. This is intended to reflect the increase in the value of a leasehold property if the lease is extended, or if it is combined – “married” – with the freehold.
What are my options?
There are two routes available to tenants considering extending the term of their lease: the “informal route” and the “formal” route. Legislation allows tenants to apply for a lease extension provided they have owned the property for at least 2 years, which is considered to be the formal route. The informal route is where the leaseholder simply contacts the landlord to try and negotiate terms to extend a lease.
How much will it cost me?
Valuing a lease extension is a specialist skill; and the premium is made up of a number of variables. Specialist advice from a Surveyor is therefore always recommended. In considering the likely costs payable, tenants should also bear in mind the potential liability for the landlord’s costs, as these are likely to be payable by the tenant also. Specialist legal advice should be considered before embarking on the lease extension process.
At Peacock & Co Solicitors we provide a bespoke service for all investors in the property market. We deal with all freehold, leasehold, commercial and residential property matters, working alongside our clients to provide high quality service. Please contact us if you wish to make an appointment and we will be happy to assist you.
Please note the contents contained in this article are for general guidance only. Legal advice should be sought before taking action in relation to specific matters