It’s an underpublicised truth that a Kings Norton residential lease is a wasting asset. As the lease term reduces so does the value of the property. The extent of this is taken for granted in the early years due to the deflation being disguised by increases in the Kings Norton property prices.Where your lease has approximately ninety years left, you need to start considering a lease extension. An important point to note is that it is desirable for lease extension to take place before the term of the existing lease slips below eighty years - otherwise a higher amount will be payable. The majority of flat owners in Kings Norton will be able to extend under the legislation; however a conveyancing solicitor will be able to confirm whether you qualify for an extension. In some cases you may not qualify. There are also strict timetables and procedures to be adhered to once the process has commenced and you will need to be guided by your conveyancing solicitor throughout the process.
It is generally considered that a property with in excess of one hundred years unexpired lease term is worth approximately the equivalent as a freehold. Where an further ninety years added to any lease with more than 30 years unexpired, the premises will be equivalent in value to a freehold for decades to come.
| 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. |
| Coventry Building Society | 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. |
| 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. |
| 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. |
Using our service gives you enhanced control over the value of your Kings Norton leasehold, as your property will be more valuable and marketable in respect of lease length should you want to sell. The conveyancers that we work with have a wealth of experience of handling many hundreds of lease extensions or freehold purchase transactions.
In 2014 Benjamin, started to get near to the eighty-year mark with the lease on his purpose- built apartment in Kings Norton. In buying his property 19 years ago, the length of the lease was of little relevance. Luckily, he noticed he needed to take steps soon on a lease extension. Benjamin arranged for a lease extension at the eleventh hour in April. Benjamin and the freeholder via the managing agents subsequently agreed on a premium of £5,500 . If he not met the deadline, the price would have gone up by at least £850.
Last August we were approach by Mr and Mrs. H Patel , who moved into a ground floor flat in Kings Norton in July 2005. The dilemma was if we could estimate the price would likely be to extend the lease by a further 90 years. Comparable residencies in Kings Norton with an extended lease were valued about £275,000. The mid-range ground rent payable was £45 invoiced annually. The lease terminated on 8 October 2094. Taking into account 69 years remaining we approximated the compensation to the landlord to extend the lease to be within £12,400 and £14,200 plus costs.
Last Summer we were approach by Mr J Evans , who purchased a studio flat in Kings Norton in February 2012. We are asked if we could estimate the premium could be to prolong the lease by an additional years. Similar properties in Kings Norton with an extended lease were worth £216,000. The average amount of ground rent was £60 billed quarterly. The lease ended on 18 January 2083. Given that there were 58 years unexpired we estimated the compensation to the freeholder to extend the lease to be between £28,500 and £33,000 not including fees.