Why Is It Important to Extend Your Lease
As a leaseholder, you need to remember that when your lease becomes “short” your property may become less valuable and difficult to sell. You may also have problems if you try to remortgage your property. In this situation you may want to consider extending your lease.
What is a lease?
When you buy a flat - especially a Shared Ownership flat - you purchase a leasehold property. This means that, as opposed to a freehold, you become the owner of your home for a fixed period of time. You and the agent who owns the land, the freeholder, will have a legal agreement, usually referred to as the lease, that will outline your rights and responsibilities.
One of the things outlined in this document will be the length of your lease, that is how long you will own the property you purchased. If the lease is considered to be a short one it may create difficulties for you and you may wish to extend it.
How long is your lease?
Most Shared Ownership leases will be based on the standard Homes and Communities Agency (formerly Housing Corporation) model Shared Ownership lease. Earlier leases would have been issued on the basis that the term was for 99 years though most recently leases are now issued on the basis of the lease agreements being a 125 year term from commencement.
When to you renew your lease?
If your lease falls below 75-80 years it is considered to be a “short” lease and may create difficulties for a leaseholder if they wish to sell or remortgage. Generally speaking the shorter the lease the more expensive it is to renew so you should start making enquiries as soon as your lease starts approaching 90 years.
Another thing to remember is that the lease runs from the commencement date on the lease, not when it was purchased and not the date when the lease was granted. So if you've bought your house on a re-sale market in 2015 but the lease for the property was drawn up in 2000, your lease is already 15 years old at the time of purchase.
Why is it important to extend your lease?
If your lease is short it may affect your chances of getting a good deal when you sell your property.
- Having a short lease on your property might mean that you'll find your flat more difficult to sell.
- Also, as a rule, properties with short leases are less valuable than those with leases longer than 90 years, so even if you do manage to sell your apartment, you may find that you get less money for it that you would otherwise.
- Remortgaging can also be difficult if your home has a short lease.
If you find that the lease on your home is short, you have a legal right to extend it.
Why would I not want to extend my lease?
Extending your lease is your right but there are circumstances when you might not choose to do so. If your lease is above 90 years, there is no need to extend it. Also, if you are not planning on putting your house on the market and you are not likely to outlive the term of the lease, you can choose to live in your home for the rest of your days and let your heirs deal with the costly process of lease extension.
If you are a Shared Ownership leaseholder, you can also have their lease extended; however they will continue to pay the rent on the unsold share in the same way as this is a fundamental clause of the lease.
How much lease to renew?
Leaseholders who satisfy certain conditions have a right to be granted a new lease usually for an additional term of 90 years.
Lease extension process
For you to be able to extend your lease, you need to meet certain conditions:
- the existing lease term must exceed 21 years, though there are no particular requirements on the period of unexpired lease. For this purpose, a tenancy with a covenant providing for perpetual renewal is deemed a qualifying lease.
- you need to have owned the property for a minimum of two years.
- lease extension is a statutory right for 100%-owned flats
- the property needs to be residential as there are different rules for commercial property.
Calculating lease extension costs
Lease extension costs depend on the type of lease you currently hold and the procedure you choose to follow (figures shown below are approximations based on a standard Shared Ownership lease).
For the Informal procedure:
- housing association’s administration fee
- valuation fee, approximately £300 + VAT depending on the surveyor you appoint
- housing association’s solicitor costs for a standard lease extension: £450 + VAT
- housing association’s solicitor costs for a property with a Head Lease: £700 + VAT
- deposit to the housing association of £250 or 10% of the lease extension value, whichever is greater
If you wish to speak to a member of our team about a lease extension, send an email to email@example.com.
NOTE: Leaseholders are always advised to consult with their legal adviser on the best option before proceeding.