Leasehold Property, understanding lease extensions.
If you have purchased or are purchasing a property as a leasehold, it is worthwhile understanding your statutory rights for a lease extension.
The Act enables leaseholders to apply for a further 90 year lease which will be added to your current, unexpired lease term. To qualify for this application you will have to have owned the property for 2 years, however there are some exceptions to this rule when buying or selling a property with what is considered to have a ‘short lease’.
For example if you have owned your home for 3 years and haven’t yet applied for a lease extension but would like to sell, you can transfer the right to apply for a lease extension to your new home buyers. This eradicates the 2 year ownership requirement so rather than them having to wait 2 years before they can apply for the extension themselves, they can submit their request upon completion.
The cost of negotiating to increase the lease term becomes more costly the shorter the term is, so it is worthwhile applying to extend your lease as early as you can within the required parameters. More importantly, if you extend your lease before it falls below 80 years then you will avoid paying what’s known as the ‘marriage value’ reducing the cost of applying for the extension.
The financial benefits in extending your lease before it reaches 80 years unexpired are clear, if you are thinking about selling or remortgaging your home and it has a short lease, there’s additional reasons it is worthwhile considering your position from and early stage. There’s the risk of not having sufficient time to exercise your statutory rights and you may have to accept the freeholders requirements on the premium charged, amongst other terms. The complications of this could result in you losing a purchaser or remortgage offer.
If you are purchasing a property with a reduced lease some mortgage providers will be reluctant to lend if a property has a lease of 70 years or less, that being said there are some high street lenders will lend on a property with a lease of 55 years.
You can obtain professional advice from Number One Mortgages on which mortgage providers to approach if you are looking to purchase a property with a shorter lease. Contact Kevin and the Number One Mortgages team on 01273 736536 or by filling out our contact form and a member of our team will be in touch.