Staying on top of your property’s lease and extending it at the right time can save you thousands of pounds in the long run.
Many properties in the UK - including the majority of flats - are owned on a leasehold basis, meaning the leaseholder is effectively renting it from the freeholder for a certain period of time. If the duration of the lease falls below 80 years, the value of the property in question will start to decline and the cost to extend it will rise.
Once a lease reaches 80 years, it will also be subject to a ‘marriage fee’ should an extension be made. By extending the lease, the property will usually increase in value. The freeholder is entitled to 50 per cent of this value, adding considerable cost to an extension for leaseholders with less than 80 years to run on their lease.
The good news is that most leaseholders have an automatic right to extend their lease under the Leasehold Reform, Housing and Urban Development Act. This entitles you to extend your lease by 90 years, providing you have owned the property for more than two years and the lease was originally granted for more than 21 years.
Allison Thompson, lettings managing director at Leaders, explains: “It can be more difficult to sell a property with a short lease as mortgage lenders may be less likely to lend, while allowing a lease to drop under 80 years means an extension will become more expensive.
“Quite simply, the longer you leave it, the more expensive it will be. So having a plan to extend your lease at the right time is crucial in order to protect your interests and your finances.
“We advise people who have a lease with about 90 years remaining to start thinking about an extension and to seek expert advice.”
Romans, the sister company of Leaders, operates a specialist lease extension department and can assist leaseholders in this important area.
Duncan Matthews, surveyor and lease extensions specialist at Romans, says many people are shocked at how much they can end up paying if they do not extend a lease early enough.
In one recent case, a property with 81 years remaining on the lease was subject to a lease extension costing £5,000, while a similar property with 63 years left ran up a bill of £18,400 for an extension.
Duncan adds: “Such figures highlight just how important it is to focus on lease extensions in the right timeframe, particularly if you wish to sell the property in future and receive its full market value.
“Looking to extend a lease under the Leasehold Reform, Housing and Urban Development Act is a must. While you will still be responsible for reasonable costs incurred by the freeholder during this process, this remains by far the most affordable way to extend a lease.”
Romans’ team of lease extension experts take care of extensions from start to finish. They can also monitor your investment portfolio to ensure numerous leases are renewed at the right times.
For more information please call the Romans team on 0333 920 3565 or click here.