Lease extensions – when to act
If you are one of the millions who own your home on a leasehold rather than a freehold basis, read on to see why extending your lease becomes of critical importance when you are approaching 80 years or less remaining on the lease or you are looking to sell your home.
Should you be looking for information relating to leasehold enfranchisement, the process that facilitates leasehold owners to jointly purchase the freehold of a building between several flat owners within the block, please read our guide to the process.
- The Leasehold Reform Act 1967 gives most (but not all) leasehold tenants of houses the right to buy the freehold, or extend their leases by 50 years.
- The Leasehold Reform Housing and Urban Development Act 1993 gives leaseholders the right to extend the lease of a flat
A leasehold enables someone to buy a property – usually a flat – for a fixed term without owning the land on which the property stands. It’s a system that makes sense when there are several self-contained residences inside one building.
In most cases, leasehold owners will pay an annual ground rent or service charge to the Freeholder, i.e. the individual who owns the land and the building the flat is in as it ensures that the grounds in which the properties are situated are well maintained and that issues such as rights of way and access are clearly defined.
Flats are typically sold on a 99- or 125-year lease, although leaseholds can be as long as 500 or 999 years, especially for ex-council properties.
As the time remaining on your lease ticks down, it can create challenges when trying to sell your flat as banks and building societies may be unwilling to lend to your buyers. The tipping point is around 80 years as banks like to know that there is at least 50 years left on a leasehold after a mortgage (typically 25 to 30 years) has been paid off.
If you have a leasehold property and are approaching 80 years left on your lease, you should instruct a surveyor directly or via your solicitor about arranging a lease extension. If you are considering selling your property, we would advise you to get the lease extended at this point in order to get the best price for your sale. You can extend the lease at any point before or after this, as long as you have owned the property for a minimum of two years.
Lease advisory services
There is an ever-increasing demand for comprehensive lease advisory services. In the 1960s and 70s, lots of flat developments and office blocks were built to meet the growing demands for housing and business premises, especially in cities where space is limited and land prices had gone through the roof. Building upwards and converting existing properties into self-contained flats saves on space and money.
Forty or fifty years after the initial leaseholds were granted, owners are now finding that banks are wary about lending to buy properties on a shorter lease of 80 years or less.
In the past, flat owners have typically approached solicitors or estate agents to discuss the possibility of leasehold enfranchisement or lease extensions. However, residential leasehold law is notoriously complex and specialised, which means that many smaller firms simply don’t have the capacity or expertise to address their clients’ concerns.
For this reason, a growing number of surveyors, including Kempton Carr Croft, now have dedicated lease enfranchisement and extension services and can act on behalf of the freeholder or the leaseholder.
As members of ALEP, the association of leasehold enfranchisement solicitors, we are extensively qualifed to assist on all matters relating to commercial and residential leasehold property.
If you live in a leasehold property or are a solicitor or estate agency advising clients on this topic and you would like to discuss arranging a leasehold extension, please contact us to discuss your requirements further.
If you are the freeholder or if you represent a solicitors’ firm or estate agents and would like us to provide leasehold-related services to your clients please do get in touch.