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When time is running out on your residential property lease what are your options?
Many properties when built were granted a lease of either 99 years or 125 years. With each year that passes the lease term will decrease and a short lease term can have significant impact when it comes to selling or even refinancing a property.
Most high street lenders require a minimum lease term of 85 years before considering a property to be suitable security for a mortgage, anything less than this will mean that the property will only be able to be bought by a cash buyer which in turn can lead to a lower purchase price.
There’s not much time left on my lease, what can I do about it?
You should not ignore the amount of time left on your lease if you are not planning to sell as “80 is the magic number”. If your remaining lease term falls below 80 years, then with each year that passes it will cost more and more if you decide to extend your lease or buy the freehold.
Lease extensions and freehold purchases are a complex area of law which is currently under review by the Government, but it is not necessary to wait until for the Government fixes the leasehold system as this could take several years. A delay in acting can cost you dearly as the cost of extending your lease or purchasing the freehold can run into tens of thousands of pounds if your lease term drops below 80 years
If you own a leasehold house it is sensible to buy the freehold rather than extend the lease however if you own a flat this option is not available to you unless more than 50% of the total flat owners wish to collectively purchase the freehold, also known as collective enfranchisement.
If you have been the registered owner of your flat for 2 years or more, you are legally entitled to extend your lease by 90 years on top of the existing term along with having the ground rent reduced to a peppercorn (no rent will be payable). In return you will pay a premium to the freeholder which is calculated in accordance with statute.
How much will it cost to extend my lease?
The Leasehold Advisory Service has an online Lease Extension Calculatorthat can provide you a rough estimate of the premium to extend your lease however it should only be used as a guide and you should always seek advice from a specialist surveyor as the calculation can be complex.
If you are unsure on how to check your lease term or if you should require any further information or advice, please get in contact with a member of our Conveyancing Team. We would be happy to discuss your circumstances and explain the procedures involved in extending your lease or purchasing your freehold along with an estimate of the likely costs.