What You Need to Know About Extending Your Lease
Once you have been registered at the Land Registry as the owner of your flat for two years, you are able to apply for a lease extension. There are three main reasons people want to extend their lease: if they are looking to sell the property, if they want to raise finances or if they want to protect the lease length. If you extend your lease at a time when there are more than 80 years remaining, you can save thousands of pounds as you will avoid paying any marriage value to the freeholder. It could be something well worth doing if you are in any of these situations.
The problem with letting your lease erode away over time is that the less time you have left on your lease, the less your flat will be worth. Eventually, when your lease runs out, it is the landlord’s right to take steps to reclaim your property. This is obviously not a desirable situation for potential buyers, as mortgage lenders don’t want to lend to someone whose property is inevitably going to drop in value over the course of their mortgage. Extending your lease makes it much easier for buyers to get a mortgage, which will help you out immensely.
When you extend your lease on your property, you will need to pay your landlord compensation for the loss he will endure as a result of your decision to extend your lease. This will comprise the diminution of the value of your landlord’s interest with the current lease compared with the lease for the next 90 years, his or her share of the marriage value and loss compensation as a result of the grant of your new lease.
To extend your lease, you must first approach your freeholder for a quotation for how much they require for you to extend the lease. If you are unhappy with this amount, or simply want to check that this is a fair price, you will want to get yourself a full valuation report from a specialist so that they can inform you about whether or not this price is acceptable. This report can then be used to dispute the amount, or if the case goes to tribunal.
A valuer will then need to negotiate with your freeholder, or a solicitor can be asked to exercise your legal rights by formally beginning the lease extension proceedings. A process of offers and counter offers then takes place for up to six months to allow both parties to agree on an acceptable figure before the case then goes to a tribunal where the price will be determined by the courts. However, if both parties can agree without legal proceedings being incurred, all the better for it.
Rex Banner is a freehold and leasehold property valuations expert who advises homeowners and lessees on their rights