Anyone thinking of selling or buying a flat that is part of a converted house ought to be or probably already are aware of the difficulties of leases running down to 80 years or below. This is a major issue since there are literally tens of thousands of houses, particularly in London but also around the country, which were converted from houses to flats originally with a 125 year lease. In contrast, with most new build developments the leases granted are much longer, often up to 999 years long.
Every year, a proportion of the large number of converted flat leases runs down to around 80 years and this results in the need to actively consider a lease extension. There are 3 main reasons why it is generally important to act at around the 70-80 year left time period :-
1. lenders for buyers when you sell may well be difficult if the lease has 70 years or less
2. your buyer themselves may require you to extend the lease before they buy
3. critically, once a lease has less than 70 years left unexpired, the cost of extending it will be significantly higher because under the statutory process to extend a lease, the formula would then include a technical calculation somewhat strangely called “marriage value”. in short, it will be cheaper to extend the lease before it gets to 80 years.
The other thing about lease extensions is that most are concluded without the value having to be determined by the Leasehold Valuation Tribunal. It is not possible for a freeholders to simply seek an exorbitant amount. Solicitors and surveyors who undertake this kind of work know the rough value to extend, which if the lease has more than 80 years left, for a typical flat worth perhaps £250,000.00 in London, would be around £10,0000.00. On top of this if you need to extend you will have to pay legal and possibly surveyors costs for both yourself and the freeholder, and that can easily ass another £3,000.00 plus VAT to the overall bill.