Don’t get caught out by lease extension timebomb

One of the main reasons for the big jump in costs when extending a lease of 80 years or less is that valuers must take into account marriage value. This is a measure  of the potential for increase in the value of the flat arising from the grant of the new lease, and it has to be shared 50:50 between the parties. Marriage value does not apply when the unexpired term is still over 80 years.

In the calculation of the marriage value the leaseholders’ and landlord’s valuers will use local knowledge and experience to assess the increase in value of the flat arising from the new lease. However, you can get a ballpark idea of the cost of extending your lease by using the quick calculator on the Leasehold Advisory Service (LEASE) website     www.lease-advice.org

LEASE advisory board director Genevieve Mariner, head of the Enfranchisement and Leasehold Reform team at chartered surveyors Strettons said: "Many flat owners put off the expense of lease extension, but they should be aware of the 80-year timebomb."

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3 thoughts on “Don’t get caught out by lease extension timebomb

  1. Sharon

    Why anyone would want to extend their lease outside of making the sale of the property more attractive to a prospective purchaser? Owning a long lease only gives leaseholders ‘an interest carved out from that of a freehold estate’ and the right to remain in the property for a pre-determined number of years. Even though they are recognised as owners they are however in a category of their own because they fall between full owner and a renting tenant. There are two inherent problems with the leasehold system – that of defective leases and poor third party management. It therefore doesn’t matter if you buy a lease extension before or after the 80-year deadline. If you have either defective leases, poor management or both then it is simply not worth it unless the lease can be varied and/or the management changed.

  2. Andy Szebeni

    Anyone owning a leasehold property with a lease coming up to 80 years expired would be well advised to seek an alternative opinion to that aired by Sharon here or they risk making a very expensive mistake.

    Shortening leases are a bit like boiling frogs: put the frog in cold water, slowly turn up the heat and it will boil to death. It is unable to sense the slow change in temperature until it is too late. Flat owners all too often have the same attitude to diminishing lease lengths.

    We encounter people daily who ignored opportunities to join freehold acquisition projects or shunned their neighbours’ attempts to join them in a group lease extension. 7 years down the line their flat is worth significantly less than that of their neighbours and it is costing much more to make their properties even mortgageable.

    Most lenders will not now lend on leases below 74 or so years. And the cost of extending at 74 years can be very much higher than that at over 80 years.

    Put simply, the investment in extending a lease close to 80 years is often less than the ultimate increase in the nominal value of the property. And the cost of doing nothing several years down the line can be extremely expensive.

    We recommend consulting expert solicitors or surveyors: you can find the vetted and experienced ones listed at the Association of Leasehold Enfranchisement Practitioners http://www.alep.org.uk. Most will happily give free advice but be vary wary of free valuations. If these are used when serving a notice and cannot be substantiated then flat owners stand to lose a lot of money.

  3. H Austin

    Weak and facile advise is not going to help people with a genuine problem.

    There are a lt of decent, professional, companies out there who can help people with concerns.

    “…7 years down the line their flat is worth significantly less…” – really?

    If the property boom tought us one thing,it is that the value of something has very little to do with logic.

    The only smart advice offered is ‘please consult a trusted professional, like a solicitor or surveyor’.

    Let’s leave the amateur dramatics at home, shall we’Mike’.

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