Billingham leases on residential properties are gradually losing value. The shorter the remaining lease term becomes, the less it is worth – and accordingly any extension of the lease gets more expensive. Most owners of residential leasehold property in Billingham enjoy rights under legislation to extend the terms of their leases. Where you are a leasehold owner in Billingham you must check if your lease has between 70 and 90 years left. There are good reasons why a Billingham flat owner with a lease having around 80 years left should take steps to ensure that a lease extension is put in place without delay
Leasehold properties in Billingham with over one hundred years remaining on the lease are often referred to as ‘virtual freehold’. This is where the lease is worth the same as a freehold interest in your premises. In such circumstances there is often little to be gained by buying the reversionary interest unless savings on ground rent and maintenance charges merit it.
| Lender | Requirement |
|---|---|
| Birmingham Midshires | Minimum 70 years from the date of the mortgage. |
| Chelsea Building Society | 85 years from the date of completion of the mortgage. Please ensure that you explain the implications of a short term lease to the borrower. |
| Lloyds TSB Scotland | Minimum 70 years from the date of the mortgage. |
| National Westminster Bank | Mortgage term plus 30 years. |
| Nationwide Building Society | - Our minimum unexpired lease term is 55 years, except where lending is over 85% of the purchase price/valuation on a second hand flat, in which case our minimum unexpired term is 90 years. - There must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start). Where the unexpired lease term is different to that recorded on the mortgage offer, the following clarifies if we need to be informed: Second hand property: - If the unexpired lease term on the offer is 85 years or more - only advise us if the actual lease term is less than 85 years - if the unexpired lease term on the offer is less than 85 years – advise us if the actual lease term is different than reported - For equity share applications - advise us if the actual lease term is different than reported on the offer - Where lending is over 85% of the purchase price/valuation on a second hand flat and the unexpired lease term on the offer is 90 years or more - only advise us if the actual lease term is less than 90 years. New build property: - If the unexpired lease term stated on the offer is 125 years (flat) / 250 years (house) or more - only advise us if the actual lease term is less than 125 years (flat) / 250 years (house) - For equity share applications - always advise us if the actual lease term is different than reported on the offer Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against. See the guidance below. SECOND HAND PROPERTIES Unacceptable - advise Issuing Office (Will be declined): - Unexpired lease term less than 55 years - Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat - Less than 30 years remaining at the end of the mortgage term - Ground Rent greater than 0.5% of the property value - Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) - acceptable if doubles every 20 years or more - Ground Rent is compounded RPI - Ground Rent review period is less than or equal to 5 years Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Unexpired lease term is 55 to 85 years - Ground Rent greater than 0.1% and less than or equal to 0.5% of the property value - Ground Rent escalation is linked to any indices greater than RPI - Ground Rent escalation is linked to the value of the building* - Ground Rent review period is greater than 5 and less than 10 years - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial, etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1% of property value p/a (please provide details of what the charges cover) - Anything that appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than 85 years (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat) - Ground Rent less than or equal to 0.1% of the property value - Ground Rent review period greater than or equal to 10 years - Ground Rent escalation less than or equal to RPI NEW BUILD PROPERTIES (includes office conversions) Unacceptable - advise Issuing Office (Will be declined) - Unexpired lease term less than 125 years on a new build flat or less than 250 years on a new build house (does not apply to Shared Ownership) - Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis - Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1% of property value p/a (please provide details of what the charges cover) - Anything else appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than or equal to 125 years on a new build flat or greater than or equal to 250 years on a new build house - A lease subject to a peppercorn Ground Rent (Annual Rent) charges For the avoidance of doubt, any New Build properties completed but not sold pre-30 June 2022 will only be acceptable if the Lease conforms to the above guidance. * Where the Ground Rent escalation is linked to the value of the building, please provide the following: - How is the value of the block/unit currently calculated and if the assessment relates to the block(s), how is the Ground Rent calculated/apportioned per property? - The current valuation and Ground Rent for each unit - What is the mechanism for future valuations of the block and how is the Ground Rent calculated/apportioned? - What is the right of appeal? And is this a documented process within the lease? - Who bears the cost of the valuation (and appeal) process? - Confirmation the review period is not less than twenty years. Lease Extensions We require all Lease Extensions to be completed under the Leasehold Reform Housing and Urban Development Act 1993 and to meet the above criteria as a minimum. Where you become aware that it does not meet these requirements, please refer to Issuing Office. Please ensure that all lender enquiries are submitted (with full documentation/requirements) at least 2 weeks prior to exchange to allow sufficient time for review and decisioning. |
Using our service will provide you enhanced control over the value of your Billingham leasehold, as your property will be more valuable and marketable in respect of lease length should you decide to sell. The conveyancing solicitors that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
16 months ago Jason, started to get close to the 80-year threshold with the lease on his leasehold flat in Billingham. In buying his home 18 years ago, the length of the lease was of minimal concern. Thankfully, he realised he would soon be paying an escalated premium for Extending the lease. Jason was able to extend his lease just in the nick of time last May. Jason and the landlord subsequently agreed on a premium of £5,500 . If he failed to meet the deadline, the figure would have escalated by a minimum £1,150.
In 2013 we were called by Mr and Mrs. K Mercier who, having was assigned a lease of a one bedroom flat in Billingham in August 1996. We are asked if we could shed any light on how much (approximately) premium could be to extend the lease by an additional years. Comparable premises in Billingham with 100 year plus lease were worth £257,800. The mid-range amount of ground rent was £65 invoiced per annum. The lease ended on 11 March 2090. Given that there were 65 years outstanding we estimated the compensation to the freeholder to extend the lease to be between £18,100 and £20,800 exclusive of costs.
Last Autumn we were phoned by Mr and Mrs. R Jones , who owned a one bedroom flat in Billingham in May 2005. We are asked if we could estimate the premium could be for a ninety year extension to my lease. Comparable flats in Billingham with 100 year plus lease were in the region of £191,400. The average amount of ground rent was £55 collected monthly. The lease lapsed in 2079. Given that there were 54 years unexpired we approximated the compensation to the freeholder for the lease extension to be within £34,200 and £39,600 not including expenses.