Romans’ team of qualified surveyors know only too well the price you can end up paying if you don’t extend your property’s lease early enough.
“We recently concluded two extensions where the capital value and the type of property were very similar, however the cost of each lease extension was dramatically different” comments Dan Lowery, Director of Romans Surveyors.
“One property had 81 years remaining on the lease and the lease extension cost £5,000. The other property had 63 years remaining and the lease extension cost was £18,400!
“This highlights how important it is to extend your property’s lease within the right timeframe, especially if you plan to sell in the future and want to ensure you receive your property’s full market value.”
A guide to lease extensions
A thorough guide to extending a lease is set out in the Leasehold Reform, Housing and Urban Development Act, here.
Most leaseholders have the right to extend their lease under this Act and it entitles you to a 90 year extension on top of the number of years remaining on your existing lease. The main qualifying criteria are that you must have owned the property for more than two years, and you must have a ‘long lease’, eg one originally granted for 21 years or more.
The Act also states that any ground rent that you currently pay to the freeholder stops once the lease extension is complete – something worth knowing.
Marriage Value - the 80 year trap
You should extend your lease at the earliest possible opportunity, the longer you leave it, the more expensive it will be. Once the remaining term reaches 80 years, there could be a significant increase, because it’s at this point that an additional ‘Marriage Fee’ is payable on top of all the other costs.
When a lease is extended it usually adds value to the property, so if your lease has 80 years or less to run the landlord is entitled to half the increase in the value of the property. Marriage Value is only applied to leases that have less than 80 years left to run which is why you should always look to renew a lease before it hits that mark.
Lease Extension procedure under the 1993 Leasehold reform Act
You should be aware that you are responsible for reasonable costs incurred by the freeholder during this process. These costs are likely to include valuation fees and legal fees in addition to your own valuation and legal fees.
The first stage in the process is for you to instruct a surveyor to carry out a valuation under the 1993 Act.
Loosely speaking, the cost of extending, also known as the premium, is calculated based on what the landlord stands to lose by granting the lease extension. Your surveyor will calculate your ‘opening offer premium’ in order for your solicitor to serve a Section 42 Notice on the landlord, which starts the formal proceedings. The extension process can either be undertaken formally or informally based on your circumstances.
If you think you should be extending your lease and would like to know how Romans Surveyors can help, or require a lease extension valuation please contact Duncan Matthews on 0845 485 6668 or email firstname.lastname@example.org.