Mitcham 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 the lease gets more expensive. Legislation has been in place for sometime now allowing qualifying Mitcham residential leaseholders to extend the terms of long leases. If you are a leasehold owner in Mitcham you should check if your lease has between seventy and 90 years remaining. In particular once the remaining lease term slips under eighty years, the premium due on any lease extension increases dramatically as part of the premium you will incur is what is known as a marriage value
Leasehold premises in Mitcham with more than 100 years left on the lease are sometimes regarded as a ‘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 purchasing the reversionary interest unless savings on ground rent and service charges warrant 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. |
| Barclays plc | Leases with less than 70 years at the commencement of the mortgage should be declined (see exception below). Leases with greater than 70 years but fewer than 85 years remaining must be referred to issuing office. Leases with fewer than 70 years should only be referred to the issuing office where the following scenario applies, as discretion may be applied subject to bank approval: • Property is located in any of the following prestigious developments: Cadogan, Crown, Grosvenor, Howard de Walden, Portman or Wellcome Trust Estates in Central London AND • The value of the property subject to the short remaining term is £500,000 or more AND • The loan to value does not exceed 90% for purchases, 90% like for like re-mortgages, 80% for re-mortgages with any element of capital raising and 80% for existing Barclays mortgage borrowers applying for additional borrowing; |
| 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. |
Engaging our service will provide you increased control over the value of your Mitcham leasehold, as your property will be more valuable and saleable in relation to the lease length should you wish to sell. The conveyancers that we work with are well versed in the legislation handling many hundreds of lease extensions or freehold purchase transactions.
Last Christmas Dexter, came very near to the 80-year threshold with the lease on his studio flat in Mitcham. In buying his flat 18 years ago, the length of the lease was of little relevance. Luckily, it dawned on him that he needed to take steps soon on Extending the lease. Dexter was able to extend his lease at the eleventh hour in March. Dexter and the freeholder via the managing agents subsequently settled on an amount of £5,500 . If the lease had fallen to less than eighty years, the sum would have escalated by at least £1,150.
Last Autumn we were e-mailed by Ms Ellen Bonnet , who was assigned a lease of a one bedroom flat in Mitcham in July 1998. The question was if we could shed any light on how much (approximately) premium would be to prolong the lease by an additional years. Similar flats in Mitcham with a long lease were valued about £208,600. The average amount of ground rent was £60 billed yearly. The lease elapsed on 7 September 2082. Given that there were 57 years remaining we estimated the compensation to the landlord for the lease extension to be between £30,400 and £35,200 plus costs.
An example of a Freehold Enfranchisement matter before the tribunal for a Mitcham premises is 50 & 52 Southcroft Road in September 2013. The tribunals own valuation determined that the premium payable should be £29,000 This case related to 2 flats. The unexpired term as at the valuation date was 86.11 and 60.64.