Articles

Q & A from the City & Angel Magazine  Property Expert Column, July 2011 

Q: Why should I extend the lease of my flat? It has 75 years left; is that not long enough?

There are several reasons why you should extend. You shall see from the below the possible impact that that the length of your lease has on the ability to sell, re-mortgage or simply on the value of your flat:

Value

An immediate and significant reason for extending a short lease is the impact it can have on the value of your property.  This is best illustrated by the following example:-

A two bedroom flat which has 80 years left to run is worth £300,000.00 on the open market and with 75 years left to run is recalculated to be worth £272,000.00 on the open market. 

Mortgage/Remortgage

Another point to consider is if you should wish to re-mortgage then the value of the property is an important factor and a lender may lend less where the property is worth less. Many lenders will also not lend or re-mortgage where a lease is below a certain number of years, which also has a negative impact on the marketability of the property should you wish to sell.

Premium

You may find that the longer you leave it to extend your lease, the more you may have to pay to the landlord. Leases that have less than 80 years left to run may cost more to extend. This is because the landlord is by law entitled to charge more to extend it. By way of example, please consider the following scenario.

A lease in 2009 with 80 years left to run was calculated to cost £2,000.00 in order to extend it.  The same lease in 2011, two years on, is now calculated to cost £8,000.00.

Please contact Hema Anand, Enfranchisement Partner for further information or see our enfranchisement section.

Source: City &Angel Magazine Ask the Expert, July 2011

Authors: Hema Anand

Date published:July 2011