Why would you look to extend your lease?
12 July 2019
The Leasehold Reform, Housing and Urban Development Act 1993 (“the Act”) provides leaseholders with the right to extend their lease; subject to certain qualifying criteria being met.
In brief, the Act provides the leaseholder with a right to extend the lease term by a further 90 years and extinguishes the ground rent. This is known as a statutory lease extension.
As the length of the remaining term decreases so does the value of the lease. Further, if you plan to have a mortgage on the property or you are planning to sell the property, you or the proposed buyer may have difficulties obtaining lending on the property unless there is at least 55 years left on the term i.e. 30 years plus the mortgage term. Some lenders will ask that there is at least 70 years left on the lease term.
You must have owned the flat for 2 years to be able to apply. If successful you will be granted a further 90 years plus the remainder of the term of the current lease.
It is best to increase your lease term early, as if the lease has 80 years or more then you will not have to pay a sum of money to the landlord when you seek the extension, this is called the marriage value.
You will need to serve a notice on the landlord, this notice must include certain information and we would suggest that you instruct an expert to assist you with this.
If you are planning to sell the property and have you have concerns that the lease term will put off potential buyers it is possible that provided you have served a claim notice that you can transfer the right to seek the extension to the new buyer. This avoids the buyer having to wait 2 years before they can seek the extension.