Extending the lease on a flat: how does a short lease impact property value and why should we extend it?
Question: We have been advised to extend the lease on our flat, where we’ve lived for quite a few years.
There are 75 years left. What difference does it make that our lease is short?
And what’s the “statutory procedure” that has been mentioned to us?
Answer: When first granted, your lease was probably for 99 years. The less time left on a lease, the less valuable the property becomes and the amount or premium payable to the freeholder to extend the lease is likely to increase.
Also, lenders will often only lend money secured on property with leases of 70 years or more left to run, which can limit numbers of future potential buyers.
However, you may use the formal procedure laid down in the Leasehold Reform (Housing and Urban Development) Act (as amended) to extend your lease.
To do this, you’ll need to have owned your property for a minimum of two years and your original lease must have been granted for at least 21 years.
A statutory lease extension gives a leaseholder a 90-year extension which is added to the unexpired term of their existing lease, so such an extension would give you a new term of 165 years.
The rent you pay now under the terms of your lease would be reset to a peppercorn for the duration of the lease, which in practice means no rent will be payable.
You’ll have to pay a premium for the lease extension and will be liable for your landlord’s reasonable costs as well as your own. These are likely to include surveyor and legal costs.
Sometimes a leaseholder and freeholder negotiate a voluntary lease extension, in which case there is no need to use the statutory procedure.
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.
If you have a question for Fiona McNulty, email legalsolutions@or write to Legal Solutions, Homes & Property, Evening Standard, 2 Derry Street, W8 5EE. Questions cannot be answered individually, but we will try to feature them here.
Fiona McNulty is a solicitor specialising in residential property.