When you buy a leasehold property, essentially you are buying nothing more than the right to occupy the building for a defined period of time and that at the end of this period of time the property would revert back to the landlord (freeholder) or the option to extend the lease (at a cost) would be given.
When the time left on the lease of a flat drops below 80 years, the property becomes significantly more difficult to sell. The premium payable to the landlord for extending the lease also goes up.
Most lenders will only accept a Leasehold Property which has more than 80 years to run. They all have individual requirements which your Solicitor will advise you on, however as an example the requirements of a few lenders are set out below;
Halifax – a minimum 70 years from the date of the mortgage.
HSBC – All residential leasehold properties must have more than 30 years remaining after completion of the term of the mortgage.All Buy to Let leasehold properties must have more than 35 years remaining after completion of the term of the mortgage.
Nationwide – Our minimum unexpired lease term is 55 years and there must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start).
National Westminster Bank
Mortgage term plus 30 years.
Santander
(i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or
(ii) less than 30 years remain and the loan is repaid on a capital and interest basis
The above information was correct as of 23rd July 2021 and was taken directly from https://lendershandbook.ukfinance.org.uk/lenders-handbook/ at question 5.14.1
If the property you are purchasing does not have the required lease term you should ask the Seller about a lease extension.
If you are thinking of selling a property with a short lease you should approach your Landlord to see if they are willing to extend the lease.
A lease extension can help you sell or mortgage a leasehold property that’s near the end of its lease, or get rid of ground rent payments. Our solicitors can guide you through every step so you can get the most out of your property.
As well as for reasons of sale, a lease extension can also be financially worthwhile if you plan to hold on to the property. It may work out cheaper to pay a premium to change the terms of your lease and replace ground rent payments with a smaller ‘peppercorn’ (nil) rent.
Voluntary Lease Extensions
A voluntary lease extension simply involves you and your landlord agreeing to a new lease between yourselves. This is often quicker than a statutory lease extension, but you could run into difficulties if your landlord charges you hidden costs, or slows down the process in any way.
Statutory Lease Extensions
If you’ve owned a leasehold flat for at least two years, you have a statutory right to extend the lease. You can use this right to make a statutory lease extension if a voluntary lease extension isn’t possible, or if the landlord isn’t offering you fair terms.
When you start a statutory lease extension, you’ll need to decide how much money to offer your landlord as a premium for extending the lease. You then need to send them your offer in a formal notice. Your landlord will have two months to either accept your offer or suggest a counter-offer. You and your landlord will then have up to six months to agree on the premium and the terms of the new lease.
Once the terms are agreed you will be ready to instruct your Solicitors to look after you through the Conveyancing Process.
Leasehold Houses
Yes. If you own a leasehold house you can only extend the lease up to 50 years.
You’ll also need to pay a rent to your freeholder for the rest of the lease. Most people who own houses choose to buy the freehold instead – see our guide to purchasing the freehold* for more information.
Leasehold Flats
You can extend the lease on a flat by an extra 90 years once you’ve owned the property for two years.
Usually, you’ll need to pay a lump sum (a premium) to your landlord and you will need to cover their reasonable legal and valuation fees. After that, your annual rent payments to the freeholder will drop to a sum known as a ‘peppercorn’ (nil).
Please contact us at Exclusive Law if you wish to discuss any of the above issues, or are interested in a quote for extending your Lease.
How much will it cost?
Our legal fees are around £500.00 – £750.00 for this process, plus VAT and disbursements. Please be aware that it is usual for the Tenant (home owner) to pay the Sellers Solicitors legal fees too.
If you would like a free consultation or to discuss how Exclusive Legal can assist you in your conveyancing needs, please contact us via the website or call us directly.
