Preserving the value of your leasehold property

Preserving the value of your leasehold property is essential for all property owners.

What is a lease?

A lease is a time-limited form of ownership of property. To preserve the value of a lease, you can extend its term to avoid the risk of the lease expiring.

At David Gray, our property solicitors can support you with preserving the value of your leasehold property.

When should a lease be renewed?

Knowing when to renew a lease can cause uncertainty for many people.

At one extreme, if there are perhaps 120 years or so left of the lease, any action to extend the term would generally be considered unnecessary. At the other end of the spectrum, if the number of years left on the lease term is half of this (or fewer), the need to take action to extend the lease has become urgent.

Within this spectrum, much depends on the particular requirements of buyers and mortgage lenders. Cash buyers with a relaxed attitude to risk, or investors, might be happy with an unexpired lease term of 70 years. This is also a standard minimum for many mortgage lenders. However, more cautious buyers with more particular mortgage lenders might require at least 90 years. Other lenders will require the unexpired term of the lease to be at least a specified number of years beyond the end of the mortgage term.

Extending a short lease

In any case though, it will be invariably more expensive for a tenant to extend a shorter lease. Buying more years from a landlord attracts a cost. If more years are needed, the landlord is likely to charge more. Therefore, it can be advantageous to extend the lease at the earliest opportunity. This could be once the unexpired term reaches two figures to avoid a higher premium at a later date.

At David Gray, we are unable to advise on the amount you should expect to pay to extend your lease. For this, you would need to seek an expert valuation. We advise that you do this whenever you are paying any more than a nominal amount to extend your lease, whichever method of extending the lease you are using.

Terms of renewal lease

Once tenants reach an agreement with the landlord regarding the amount payable, we will be able to assist with the work needed to ensure you obtain what you are paying for. This includes:

• Advising on the terms of the renewal lease, and ensuring that is in a form consistent with your existing lease
• Making sure that the lease extention complies with any requirements arising from the landlord’s title
• Your obligations under your own mortgage
• Registering lease at the Land Registry following completion

If you and your landlord cannot agree on the amount payable to extend your lease and you have held the lease for at least two years, you can serve notice initiating the statutory lease extension procedure. Normally, regardless of how long you have owned leasehold property or how long is left on the lease, a quote for extending the lease will be available. Landlords are aware of the statutory rights tenants have, and will usually extend a lease at the right price.

Statutory Procedure

If agreement over the right price is not forthcoming, or if the landlord is simply being slow to respond to negotiations, you can use the statutory procedure to seek an extension of the lease if you have owned the property for two years. At David Gray, we can assist with this. You would be advised to obtain an expert valuation of the fair premium payable for extending the lease. Then, you can embark on the statutory route if necessary. Should you do this, you must be prepared to cover the landlord’s costs. This is often true of a privately negotiated lease extension as well.

For leasehold property owners, it is important to continue checking the lease term, regardless of:

• Where your leasehold property is located
• How long is left on the lease
• Whether your landlord is receptive to extending the lease

Then, once you have made the decision to reset, it is equally sensible to make sure that you are properly advised on what is involved, in order to preserve the value of your leasehold property and give you peace of mind that your asset is marketable.

Contact us for support with preserving the value of your leasehold property

At David Gray, our property solicitors include specialist leasehold solicitors. Contact us for specialist advice on preserving the value of your leasehold property and lease extensions on 0191 243 8167 or complete our online form.