Hackney leases on residential properties are gradually decreasing in value. The shorter the remaining lease term becomes, the less it is worth – and as a result any extension of the lease gets more expensive. Legislation has been in place for sometime now allowing qualifying Hackney residential leaseholders to extend the terms of long leases. Where you are a leasehold owner in Hackney you would be well advised to check if your lease has between seventy and ninety years left. In particular once the remaining lease term slips under 80 years, the cost of any lease extension increases dramatically as part of the premium you pay is what is known as a marriage value
Leasehold residencies in Hackney with over 100 years unexpired on the lease are often regarded as a ‘virtual freehold’. This is where the lease value the same as a freehold interest in your premises. In such situations there is often little upside in purchasing the reversionary interest unless savings on ground rent and estate charges justify it.
| 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. |
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Godiva Mortgages | A minimum of 70 years unexpired lease at completion for all scheme types apart from Lifetime Mortgages (Equity Release), which require a minimum unexpired term of 80 years at completion. |
| Leeds Building Society | 85 years remaining from the start of the mortgage. |
| Santander | You must report the unexpired lease term to us and await our instructions if: 1. the unexpired term assumed by our valuer is between 55 and 82 years, but the actual unexpired term differs by more than one year (whether longer or shorter); or 2. the unexpired term assumed by our valuer is more than 82 years but the actual unexpired term is less than 82 years; or 3. no valuation report is provided However, we will not accept a lease where on expiry of the mortgage: (i) less than 50 years remain and all or part of the loan is repaid on an interest-only basis: or (ii) less than 30 years remain and the loan is repaid on a capital and interest basis We will accept a lease that has been extended under the provisions of the Leasehold Reform Act 1993 provided statutory compensation would be available to the leaseholder. |
The conveyancing solicitors that we work with procure Hackney 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 conveyancer we work with provide it.
Last October Luca, came dangerously close to the eighty-year threshold with the lease on his leasehold apartment in Hackney. Having purchased his flat 19 years previously, the length of the lease was of no significance. As luck would have it, he realised he needed to take action soon on Extending the lease. Luca extended the lease at the eleventh hour last May. Luca and the landlord who owned the flat above eventually settled on a premium of £6,000 . If he had missed the deadline, the figure would have gone up by at least £1,075.
Dr R Thompson moved into a newly refurbished flat in Hackney in May 2002. The question was if we could approximate the premium would be for a 90 year lease extension. Comparable properties in Hackney with 100 year plus lease were in the region of £300,000. The average amount of ground rent was £50 invoiced quarterly. The lease expired on 16 February 2100. Given that there were 75 years as a residual term we approximated the premium to the landlord to extend the lease to be between £8,600 and £9,800 not including fees.
An example of a Freehold Enfranchisement matter before the tribunal for a Hackney property is 150 Amhurst Road in December 2013. The tribunal concluded that the premium to be paid by the applicant for the enfranchisement of the subject property was £43,500. This case affected 4 flats. The remaining number of years on the lease was 90 (or thereabouts).