Does Your Property Have A Short Lease?
If the lease is running below 90 years on your property, then you might want to evaluate your extension options.
With more than 4 million leasehold properties in the UK, it’s quite common to live in a home where the freehold belongs to someone else. This means that the actual building and land it resides on both belong to the freeholder and the length of your lease will determine how long you’re allowed to remain there. Although it is rare for a lease to run out and your property to be handed back to the freeholder, this is the reality presented by leasehold law. Therefore, the only way to stay on top of your lease is to check how long it is and extend it as required.
Why Extend Your Lease?
Aside from the possibility of having to hand your property over to a freeholder, there are a number of other reasons why you would extend your lease, long before it expires. You might want to consider extending any property with a lease of less than 90 years, and a property with less than 80 years on the lease needs to be dealt with urgently.
A property with a short lease can be difficult to sell as potential buyers don’t want the headache and associated costs that come with extending the lease themselves. Not only are short lease properties difficult to sell, but this factor also reduces the property value somewhat too. If you want a great price when you come to resell your home, then make sure you’re offering an attractive length of lease to potential buyers.
Mortgage companies also look unfavourably at properties with short leases. So even if you find a buyer who likes your home and is happy to purchase with a view to extending the lease themselves, they may find a hard time securing a mortgage. Loan providers are aware that the value of a short lease property will decrease rapidly when the lease isn’t extended. Therefore, this sort of loan arrangement wouldn’t represent a good investment for them.
Why Wouldn’t You Apply For A Lease Extension?
There are some scenarios where you wouldn’t necessarily want to extend the lease on your property. A professional conveyancing solicitors Essex team explains that if you’re planning to purchase the freehold of your property, then it wouldn’t be necessary to extend the lease first.
If you have a reasonably long lease, perhaps just over the 90 years mark and aren’t planning to live in the property for more than a couple of years, then it can be worth gambling on the prospect of finding a buyer who is happy to inherit your home and extend the lease themselves.
Extending a lease can be an expensive step, particularly when there are few years remaining, so it’s important to act at the right time. For properties with leases of less than 60 years, the cost of extension increases by as much as 1% of the value of the property each year. So for a property worth £300,000, the cost of extension would increase by £3,000 each year at this point.
Extending your lease is a big decision and one that needs to be carried out at the optimal time. It’s a good idea to seek legal advice from lease extension specialists before making any firm commitments.