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Top reasons for Exminster lease extension


Top reasons for lease extension now:

A Exminster lease depreciates with the years remaining on the lease.

The market value of a leasehold property in Exminster is impacted by how many years the lease has left to run. If it is close to or fewer than 80 years you should envisage problems on re-sale, so it is recommended to arrange for a lease extension prior to purchasing. It is preferable to commence the process of extending the lease is when a lease still has 82 years remaining so that formalities can be finalised in advance of the 80 year threshold. Statute enables Exminster qualifying lessees to an additional term of 90 years in addition to the remaining term, at a peppercorn rent (no ground rent). The reason of the valuation is to determine the amount payable by the lessee to the freeholder for the acquisition of the lease extension.

Exminster property with a lease extension is almost the same value as a freehold

It is conventional wisdom that a residential leasehold with in excess of one hundred years unexpired lease term is worth roughly the same as a freehold. Where an further 90 years added to any lease with more than 45 years unexpired, the premises will be equivalent in value to a freehold for decades to come.

Lending institutions may not finance a property with a short lease

Lenders are making their criteria more stringent and a meaningful number now require flats to have at least 60 if not 70 years remaining once the mortgage has expired. As a number of flats in Exminster were created in the 1950s, 1960s and 1970s as a result many now require lease extensions if they wish to obtain a mortgage.

Lender Requirement
Bank of Scotland Minimum 70 years from the date of the mortgage.
Barnsley Building Society 60 years from the date of the mortgage application subject to 35 years remaining at the end of the mortgage term.
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.
Virgin 85 years at the time of completion. If it's less, we require it to be extended on or before completion.

Get in touch with one of our Exminster lease extension solicitors or enfranchisement solicitors

The lawyers that we work with undertake Exminster lease extensions and help protect your position. A lease extension can be arranged to be completed to coincide with a change of ownership so the costs of the lease extension are paid for using part of the sale proceeds. You really do need expert legal advice in this difficult and technical area of law. The conveyancing solicitor we work with provide it.

Exminster Lease Extension Example Cases:

Paige, Exminster, Devon,

Off the back of unsuccessful negotiations with the freeholder of her first floor flat in Exminster, Paige started the lease extension process just as the lease was coming close to the critical 80-year deadline. The transaction completed in November 2015. The freeholder’s charges were restricted to under six hundred pounds.

Exminster case:

Last Autumn we were e-mailed by Mr and Mrs. Y Bailey , who bought a recently refurbished apartment in Exminster in November 1997. The dilemma was if we could estimate the price could be to prolong the lease by an additional years. Comparative premises in Exminster with an extended lease were in the region of £250,000. The average amount of ground rent was £50 invoiced quarterly. The lease expired in 2093. Considering the 69 years unexpired we approximated the compensation to the landlord to extend the lease to be between £9,500 and £11,000 exclusive of fees.

Exminster case:

Mr B Collins was assigned a lease of a one bedroom flat in Exminster in September 1997. The question was if we could shed any light on how much (roughly) compensation to the landlord could be to prolong the lease by 90 years. Similar residencies in Exminster with a long lease were valued around £285,000. The average ground rent payable was £55 collected yearly. The lease ran out on 4 May 2104. Considering the 80 years remaining we estimated the compensation to the landlord to extend the lease to be between £12,400 and £14,200 not including professional charges.