For anyone whose Knutsford home is held on a long lease, our message is clear – if you ignore the situation, the property will eventually revert to your landlord, leaving you empty-handed. The shorter the lease the lower the value of the property and the more it will cost to extend the lease.
Leasehold premises in Knutsford with more than one hundred years outstanding on the lease are sometimes referred to as ‘virtual freehold’. This is where the lease value the same as a freehold interest in your property. In such circumstances there is often little to be gained by buying the reversionary interest unless savings on ground rent and service charges warrant it.
| Lender | Requirement |
|---|---|
| Bank of Scotland | Minimum 70 years from the date of the mortgage. |
| Birmingham Midshires | 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. |
| Lloyds TSB Scotland | Minimum 70 years from the date of the mortgage. |
| 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 |
Retaining our service gives you enhanced control over the value of your Knutsford leasehold, as your property will be more valuable and saleable in relation to the lease length should you decide to sell. The conveyancers that we work with have a wealth of experience of handling many hundreds of lease extensions or freehold purchase transactions.
Reuben owned a studio flat in Knutsford being marketed with a lease of just over 59 years left. Reuben informally spoke with his freeholder a well known London-based freehold company and enquired on a premium to extend the lease. The freeholder indicated a willingness to grant an extension taking the lease to 125 years on the basis of an increased rent to £125 per annum. No ground rent would be due on a lease extension were Reuben to invoke his statutory right. Reuben procured expert advice and was able to make an informed decision and handle with the matter and readily saleable.
Last month we were contacted by Mr and Mrs. F Harris , who took over the lease of a first floor flat in Knutsford in August 2004. We are asked if we could shed any light on how much (roughly) premium could be to prolong the lease by ninety years. Comparable premises in Knutsford with 100 year plus lease were valued about £290,000. The mid-range amount of ground rent was £60 billed quarterly. The lease elapsed on 7 July 2104. Considering the 80 years unexpired we estimated the premium to the freeholder to extend the lease to be between £13,300 and £15,400 not including legals.
Dr G Scott acquired a basement apartment in Knutsford in February 2009. The question was if we could approximate the premium would likely be to prolong the lease by an additional years. Identical residencies in Knutsford with 100 year plus lease were in the region of £200,800. The average ground rent payable was £65 billed yearly. The lease expired in 2084. Considering the 60 years left we estimated the compensation to the landlord to extend the lease to be between £20,900 and £24,200 exclusive of professional charges.