‘We paid £12k just to get a signature': Flat owners must keep track of years – and act fast before it slips below 80
- The amount of years left might be critical when selling or remortgaging
- Leases from when the property is built usually run for 99 or 125 years
Owners of leasehold flats must keep track of a crucial number – the years they have left on their lease – and to act fast to extend it before it falls beneath 80.
How many years you have left on your leasehold can prove critical when you come to selling or remortgaging as a leasehold property theoretically gives owners the right to dwell there for only a restricted time.
The land it stands on is possessed by a freeholder or landlord who charges rent and can ultimately possess the flat when the lease runs out.
As mortgage lenders have minimum conditions concerning the remaining term on the lease the lease span is essential. They’ll not give, in case these cannot be met.
Halifax, for instance, needs an unexpired period of at least 70 years at the time of application. After it falls below 80, the costs to expand the lease can grow as the landlord can ask for a share of the extra value the property will be added to by the extension.
The good news is that the 1993 Leasehold Reform Act gives most flat owners the right to extend their lease as long as they have owned the flat for at least a couple of years.
A shrinking lease must not deter an owner from placing up a property on the market as it’s still possible to begin the lease extension process and assign the extension to the purchaser.
Either way, growing a lease can be a time-consuming – and costly – procedure. The sums to get a lease extension are complicated and the cost will depend on ground rent the house value, location and the way many years are left on the lease.
Another critical element is the disposition of the freeholder – as the leaseholder will need to enter a procedure of negotiation.
Freeholder and the leaseholder must each appoint a solicitor and a specialist surveyor to prolong a lease. The surveyor’s job will be to carry out a complicated calculation, including the current duration of the lease, the flats value, the property’s location, ground rent, the lease as well as the flats value when the lease is expanded.
The leaseholder’s surveyor puts an amount to open dialogues forward and then the solicitor serves the 1993 Leasehold Reform Act is a section 42 noticed under by the freeholder.
This can include the freeholder’s launch price – inevitably higher in relation to the leaseholder’s offer. The surveyors from each side then negotiate until a price is finally agreed.
If both sides fail to reach an agreement either party could make an application to the First Tier Tribunal – previously the Leasehold Valuation Tribunal – that may rule as to what is a reasonable price. However, this may mean additional costs for both sides.
Instead, it could be worth contacting the freeholder direct to reach an informal agreement in regards to a lease extension, avoiding the headache of issuing formal notices.
Either way, once a price was agreed, the freeholder’s solicitor will create a new lease that the leaseholder’s solicitor will then double check.
The leaseholder’s solicitor will register the new lease with all the Land Registry after both parties are happy and have signed it.