Judging whether or not a lease extension makes good financial sense is a thorny issue for many flat-owners. Emma Crowley (above left) from Bruce Lance in Poole will help you decide.
As most flat owners are aware, a lease is a depreciating asset: the value of the lease decreases in line with the remaining term. The cost of extending the lease can also increase as the time left on the lease diminishes. This leaves many flat-owners facing the question of whether they should bite the bullet and incur the cost of extending their lease, or whether they should leave it for the next owner and hope the short lease doesn’t impact too adversely on the value of their flat.
If you have owned the property for two years, you have a legal right to extend the lease to 90 years. You will need to serve a notice on the landlord, which must include specific information. We recommend that you take legal advice in order to get this right first time.
The issue of extending a lease often arises when you come to sell the property. If a lease has less than 70 years left on the term, then you may have problems selling it without a lease extension. Mortgage lenders have varying policies, but many will refuse to lend on a leasehold property that has less than 65 years remaining on the term. The prospect of having to pay for a lease extension in the near future can also deter prospective buyers.
Sometimes, when a leasehold property is sold with a short term remaining on the lease, the buyer and seller agree to share the cost of the lease extension. However, in most cases, the liability falls solely to the seller. Trying to tie in a lease extension with a property sale can cause significant delays to the sale transaction and possibly jeopardise it entirely, so it is certainly something worth thinking about in advance.
If you think that your lease may need extending, please contact myself or Sarah March-Paschal at Bruce Lance solicitors to discuss the necessary steps. We will be happy to provide a free estimate of costs for the work involved.
Emma Crowley is a residential conveyancing executive at Bruce Lance in Poole. You can contact her, or residential conveyancing solicitor Sarah March-Paschal, on 01202 679379 or at www.brucelance.co.uk
a. 2 Winchester Place, North Street, Poole, Dorset, BH15 1NX
t. 01202 679379