Leasehold properties - What is a reasonable remaining term?

Of course, an agent should always be able to tell you the length of a lease on an apartment for sale and the associated service charges.    However, there are several other bits that mortgage lenders and solicitors are now advising their clients of.

The general rules are that a mortgage lender will require the length of the lease to be at least 3 times the length of the mortgage.  That means with traditional mortgages, the requirement will be that the lease is over 80 years at the point of completion.

However, solicitors are often recommending to buyers that they should attempt to extend the lease or try and make this part of the transaction.     I had a personal interest in this recently as we were acting for a seller who owned a flat in a block where I am the freeholder.   Now the lease has still over 100 years to run, so won’t be in danger of running out during my lifetime. But, as the buyer pointed out, if she owns the property for 10 years, the lease will then become one of those in danger of becoming expensive to renew.

Now the problem is that to extend a lease, there is a premium.   (There are plenty of online calculators to give you a guide) We’ve seen charges or estimates from £2,000 right up to £24,000 of late.  (In fairness, the higher figure was to extend a lease with only 65 years to run).

There are laws in place that gives all leaseholders the right to have their leases extended.  This can normally be actioned after you have owned a property for two years.  This involves the leaseholder being responsible for instructing a value to determine the value of the leased extension and then also paying the freeholders legal costs.   In my own case, we have agreed a lease extension for 199 years.   The buyer’s premium is fairly small and the costs around £700.   But after this has been granted, they will have the security of knowing that the lease will not only outlast us, but probably their grandchildren.

Tags: Buy, sell, estate agents, leasehold, Thanet
Category: Leasehold properties - What is a reasonable remaining term?
Paul McGuirk - 25/04/18
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