In the recent King’s Speech, the Government proposed making significant changes to leasehold ownership in this country. That was followed up by the Leasehold and Freehold Reform Bill now presented to Parliament.
One aspect involves extending residential leases. Under a lease, a tenant is given the right to occupy premises for a fixed period. The longer the period left at any time, the more valuable the leasehold interest, which can be mortgaged or sold in appropriate circumstances. However, if there are less than 80 years left, difficulties can be expected in finding a buyer or a lender.
Under current legislation, it is usually possible to require the landlord to extend the lease by up to 90 years (for a flat) or 50 years (for a house). This does require a payment being made to the landlord based upon a number of factors including, in particular, the time remaining on the lease.
Under the Government’s proposals, the standard extension period for a flat will increase from 90 years to 990 years with a statutory calculator being used to decide what the landlord should be paid (so saving the need for parties to pay their own valuers to decide a fair sum). The amount of that sum will also be less than at present. This will be a considerable benefit to leaseholders – indeed one report suggests this will all increase the value of leasehold properties by almost 10%.
If you are a leaseholder looking to extend your lease, you may be thinking you’ll simply wait for these leasehold reforms to come into effect. However, bear in mind that there is no guarantee the changes will happen and, if they do, when that will be exactly. In any event, you may not be able to wait. For example, if you’re thinking of selling your property, buyers won’t be able to get a mortgage if the lease term is too low and any offers put forward will be low.
We can assist you in identifying whether you can seek an extension and when to do so.Back to all articles