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Top reasons for Great Shelford lease extension


Main reasons to start your Great Shelford lease extension today:

Increase your lease and increase your Great Shelford property value

Great Shelford leases on residential properties are gradually diminishing in value. The shorter the remaining lease term becomes, the less it is worth – and accordingly any extension of your lease gets more expensive. It is the case that most Great Shelford tenants have the right to extend their lease by an additional 90 years in accordance with the 1993 Leasehold Reform Act. Where you are a leasehold owner in Great Shelford you should check if your lease has between seventy and ninety years left. There are good reasons why a Great Shelford leaseholder with a lease having around 80 years remaining should take steps to make sure that a lease extension is actioned without delay

An extended lease is almost the same value as a freehold

Leasehold residencies in Great Shelford with in excess of 100 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 home. In such situations there is often little upside in buying the freehold unless savings on ground rent and estate charges justify it.

Mortgage lenders will not finance a property with a short lease

Mortgage lenders have set criteria when lending funds secured on leasehold property. Many will simply refrain from lending at all once an unexpired lease term falls under a certain unexpired lease term. Many Lending institutions will not regard property with an unexpired term of less than seventy years as adequate security. As well as impacting your ability to sell, it is also relevant where you are seeking to refinance your Great Shelford property.

Lender Requirement
Accord Mortgages 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.
Halifax Minimum 70 years from the date of the mortgage.
Leeds Building Society 85 years remaining from the start of the mortgage.
TSB Minimum of 70 years at mortgage commencement, with 30 years remaining at mortgage redemption.
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

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.

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

Regardless of whether you are a tenant or a freeholder in Great Shelford,the lease extension lawyers that we work with will always be willing to discuss any residential leasehold matters and offer you the benefit of their in-depth market knowledge and the close ties they enjoy with Great Shelford valuers.

Great Shelford Lease Extension Case Summaries:

Katie, Great Shelford, Cambridgeshire,

Subsequent to unsuccessful negotiations with the landlord of her studio flat in Great Shelford, Katie commenced the lease extension process just as her lease was nearing the crucial eighty-year threshold. The lease extension was concluded in June 2011. The freeholder’s charges were negotiated to slightly above 550 GBP.

Great Shelford case:

Mr and Mrs. B Davies acquired a ground floor flat in Great Shelford in May 2010. We are asked if we could approximate the price could be for a 90 year extension to my lease. Similar residencies in Great Shelford with an extended lease were in the region of £280,000. The average amount of ground rent was £55 collected annually. The lease expiry date was in 2103. Taking into account 78 years unexpired we estimated the compensation to the freeholder for the lease extension to be within £13,300 and £15,400 not including fees.

Great Shelford case:

In 2009 we were contacted by Dr Isaac Green who, having owned a purpose-built flat in Great Shelford in March 1998. We are asked if we could estimate the compensation to the landlord could be to prolong the lease by ninety years. Comparable flats in Great Shelford with 100 year plus lease were worth £186,000. The mid-range amount of ground rent was £65 billed quarterly. The lease ran out on 27 November 2083. Taking into account 58 years remaining we calculated the compensation to the landlord for the lease extension to be between £23,800 and £27,400 not including fees.