The market value of a leasehold property in Downend is impacted by how long the lease has remaining. If it is close to or less than eighty years you should foresee problems on re-sale, so it is recommended to arrange for a lease extension prior to purchasing. Ideally one should start the lease extension process when a lease still has 82 years remaining so that a lease extension can be finalised prior to the 80 year cut off point. Statute enables Downend qualifying lessees to obtain a lease extension of ninety years in addition to the remaining lease term at a peppercorn rent (that is, rent free). The reason of the valuation is to arrive at an opinion of the amount payable by the lessee to the freeholder for the purchase of the lease extension.
It is conventional wisdom that a residential leasehold with in excess of 100 years remaining is worth approximately the same as a freehold. Where an further 90 years added to any lease with more than 30 years left, the premises will be equivalent in value to a freehold for many years ahead.
| Lender | Requirement |
|---|---|
| Bank of Scotland | 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. |
| The Mortgage Works | Minimum unexpired lease term is 70 years with 30 years remaining at the end of the mortgage term. 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 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 70 years - 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 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 70 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 1.0% 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 - 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 - 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 reviewed and altered on any review basis or methodology 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 1.0% 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 the Issuing Office |
| Royal Bank of Scotland | Mortgage term plus 30 years. |
| Yorkshire 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. |
Irrespective of whether you are a tenant or a freeholder in Downend,the lease extension solicitors that we work with will always be prepared to discuss any residential leasehold matters and offer you the benefit of their experience and the close ties they enjoy with Downend valuers.
Stanley was the the leasehold proprietor of a 2 bedroom flat in Downend being sold with a lease of a little over 72 years outstanding. Stanley informally contacted his freeholder a well known London-based freehold company for a lease extension. The landlord was keen to agree an extension on non-statutory terms taking the lease to 125 years on the basis of an increased rent to £200 yearly. No ground rent would be due on a lease extension were Stanley to invoke his statutory right. Stanley procured expert legal guidance and was able to make a more informed judgement and handle with the matter and readily saleable.
Ms Rosie Martinez purchased a studio flat in Downend in August 1998. The question was if we could shed any light on how much (approximately) premium would be to extend the lease by an additional years. Identical residencies in Downend with 100 year plus lease were worth £290,000. The mid-range amount of ground rent was £45 invoiced yearly. The lease finished in 2098. Given that there were 73 years left we approximated the premium to the freeholder for the lease extension to be between £9,500 and £11,000 plus expenses.
In 2011 we were called by Dr Phoebe Kelly who, having owned a one bedroom apartment in Downend in February 2000. The dilemma was if we could shed any light on how much (approximately) price could be for a 90 year extension to my lease. Comparable flats in Downend with 100 year plus lease were valued about £240,600. The average ground rent payable was £60 collected yearly. The lease came to a finish on 26 January 2087. Having 62 years left we calculated the premium to the freeholder to extend the lease to be within £21,900 and £25,200 not including costs.