Flat Leasehold Extensions
Posted on 15th June 2020
What does “Leasehold” mean?
A full blog dedicated to the word Leasehold can be found here. Essentially though, where there is a lease of a property it will be known as “Leasehold” meaning that the property will be owned by you for a set number of years. Owning the Leasehold will allow you a right of occupation or use of the property.
What is a Lease?
The Legal is a legal document allowing the Lessee (the person taking the lease) to occupy a property. Think of it as a contract. It sets all the things both you and the freeholder/landlord can do throughout the term of the lease, such as no pets or what costs the freeholder/landlord can charge you.
How long will I own my Leasehold flat for?
Many flats come with a lease of 999 years, particularly if they are on a new development. Your lease will tell you how many years your lease term will last. For example, a lot of flats bought from the Council under the right to buy scheme, were sold with leases of 125 years and some older leases are granted for 99 years.
Can I sell a leasehold flat?
Yes. During the lease period the flat can be bought or sold but as the term (length) of the lease decreases as the years go by, the lease (and so the flat) will reduces in length and in value.
What do I need to tell the bank about my lease?
The general rule is that the shorter the lease the less attractive it is to the mortgage lenders. All banks and building societies have their own specific lending criteria, some lenders will not lend where there is anything less than 75 years on the lease and for a lease with less than 60 years left to run it can be difficult to get any kind of mortgage at all.
What can I do about my short lease?
You may with to approach the Freehold/landlord to negotiate an extension or you can go via the route of the Leasehold Reform Housing and Urban Development Act 1993. Under the act, if you have owned the flat for two years, you can force the Landlord to extend the lease, as a flat owner you would be entitled to an extra ninety years on top of what is remaining and with the whole term being a nil rent. Say you have a lease of a flat which has 75 years left to run, a new lease of 165 years (that’s your additional 90 years plus your 75 years you had left to run) can be substituted for the existing lease with no rent to pay for the whole term of 165 years.
How do I extend my lease?
If you decide to use the 1993 Act to extend your lease, then you must serve formal notice on the Landlord. The formal notice must include the price proposed for the lease extension, this figure will be calculated by a professional valuer which will seek to compensate the Freeholder for the loss in ground rent.
Key points for Leasehold Flats:
1. After two years of owning the flat, the owner can buy an extra 90 years to add to their lease
2. No rent will be payable during the term of the new lease
3. 80 years is the crucial cut-off point, below that and the lease becomes more expensive to extend
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