Reasons to choose Wilson Browne
Many UK properties are sold on a leasehold basis every year.
Often flats and apartments are only available to buy as a leasehold and on occasion a house will be sold on this basis too. Not all leases are capable of extension so it is important to check if yours is one that can be.
Once you have owned your leasehold for 2 years you may be entitled to apply to the freeholder for an extension of the lease. Should you do this though?
As time passes so the amount of time left on the lease – it’s “term” is reduced. With each year that goes by, the lease itself gets shorter and the cost of extending it increases.
If you have a property which still has 95 or more years on the lease, you may not be concerned. Selling a leasehold property with 95 years left on the lease will be achievable and the remaining term will not cause a lender a problem.
But what if you intend to stay? If there are 95 years left on the lease and you intend to remain for the foreseeable future, you may see no reason to extend the lease.
The problem, of course, comes much later when you wish to sell or if you need to re-mortgage and now there are less than 80 years remaining on the lease. You – or your Executors in some cases – now have a very much more expensive exercise to extend the lease. The premium will have gone up but you may well not find a buyer unless the lease is extended so that it is long enough to get a mortgage on.
In short – the sooner you extend the lease the sooner you deal with the problem that is otherwise being stored up for the future.
The added bonus is that extending the lease will often reduce the ground rent to a peppercorn or nominal amount. On a lease with a ground rent that increases every year, 2 years or 5 years this can represent a considerable saving over the period of ownership. It also makes the property far more attractive to a future buyer.
It is important to think ahead if you have a leasehold property where the lease is capable of being extended. Whilst you may see no immediate benefit in paying the premium to extend it can ensure you
- Are able to remortgage should you need to
- Limit the ground rent to a nominal amount
- Protect your asset by making it more saleable in the future