Leasehold Property -Do you own, or are you buying one? Check lease length now!

wesleystrider

Hi Everyone,

Just wanted to make as many leasehold property owners as possible aware of current legislation for extending leases. I'll keep this brief but you can find further advice at LEASE

The magic number in this case is 80 . Basically, to extend the lease when there is still at least 80 years left to run is generally FAR FAR cheaper than to do it below 80 years (even 79.9!).

Explanation:

The valuation of the cost of the extension for, say, a flat with 68 years unexpired lease, a ground rent of £50 per annum and a present market value with its existing lease as £150,000 will include:

1) 'The Term'
2) Plus 'The Reversion' at 68 years
3) Minus 'The Reversion' at 158 years (i.e. 68 years plus 90 years)
4) Plus 'The Marriage Value'

It is this last figure, 'The Marriage Value' that is the important part here. If you extend while the lease still has 80 years to run, it will not be included in the calculations.

Thats worth repeating: Above 80 years, the marriage value is not included in the calculations

So, how much difference can that make?

Well, for the above example....

---

...with 68 year lease:

'The Term' Plus 'The Reversion' at 68 years Minus 'The Reversion' at 158 years (i.e. 68 years plus 90 years) = £1500

'The Marriage Value' = £6750

So total = £8250

---

...with 95 year lease:

Same as above but without the Marriage Value being included.

So Total = £1500

---

This means a possible 'saving' of £6750 in this case

I say 'possible' because the above calculations (which are covered in far more detail at LEASE - follow the above link) are using a yield value of 8% and all extension valuations are subjective - you should have them performed by a qualified chartered surveyor.

NB You must meet certain prerequisites to be able to force your landlord to extend the lease (such as owning the property for at least 2 years) but again go to LEASE to find this out.

The process would probably be...

1) Attempt to negotiate with your landlord to extend (preferred)

and, if that fails

2) Get legal and serve notice on him/her with the help of valuers and solicitors (costly and lengthy)

Anyway, hope this was useful!

(And if you're thinking of buying a leasehold property, beware! Remember that you WILL NOT be able simply to move in and extend immediately - you will have to wait two years and this could take you below the 80 year threshold - best if you're too close to the 80 years to get your vendor to extend before you move in)

Here's that link again:

LEASE

wesleystrider

Just to clarify the examples above - I know that the 68 and 95 years examples are quite a distance apart. However, savings of thousands of pounds can be made by extending at 81 years rather than letting the lease fall to 79.

Not only will you be saving money on the extension, but you'll also be adding value to your property too.

jumpt

thanks for the info, I read that site a while ago and came to the conclusion that 80 years is critically important when it comes down to your lease. Although I have to say everywhere else barely seems to mention it!
So I think you're quite right to shout it from the rooftops people need to know!

wesleystrider

I know - quite unbelieveable that this is not more widely known. Freeholders consistently make well above what they should be as their leaseholders are in the dark.

Also, make sure you do the maths yourself to work out the lease length - don't just go with what you've been told in the past by your vendors/estate agents. These figures can often be wildly innaccurate.