The property market may be buoyant at present, but if there are fewer than 90 years to run on your lease, the value of your flat, instead of increasing, could diminish.
The problem is compounded if there are fewer than 80 years left on your lease since many mortgage companies will refuse a mortgage on such flats. This means fewer potential purchasers and a lower sales price.
However, the good news is that you do have a right to extend the lease of your property to 90 years plus the remaining number of years on your current lease, and the new ground rent on your new lease will be just a peppercorn.
There are certain conditions. These are
1. You must have owned the flat for at least two years, although you do not need to have lived in the property during that time
2. The original lease must be a long one – at least 21 years
3. You must pay a premium to the landlord for the new extended lease.
4. You must serve the landlord with a notice, in the correct form.
Don’t wait too long to extend your lease. The longer you wait, the shorter your lease becomes, then the higher the price you will have to pay.
80 years is the magic number as regards lease extensions because the cost of the premium starts to rocket if your lease is less than 80 years in length. This is because you will have to pay 50% of the flat’s “marriage value” as well as the usual lease extension price. The “marriage value” is the amount of extra value a lease extension would add to your property.
The ideal time to extend your lease may be if it has between 89 and 81 years left to run. If your lease has less than five years to run at the time of the claim for a new lease the landlord may apply to the court for an order preventing you from exercising your right, if he can convince the court that he intends to carry out substantial works of construction on the premises in which the flat is contained.
Tenants of flats in certain types of buildings including crown properties, those owned by the National Trust and those within the precinct of a cathedral are excluded from the right to a lease extension. The landlord must not be a charitable housing trust, and the lease must not be a business tenancy.
* If you are a landlord, it is very dangerous to ignore a notice requesting a lease extension, served on you by a tenant. If you do not respond with a counter notice, containing your own proposal for a premium by the date given, you may be obliged to accept the premium offered by the tenant, however low it may be, (as long as the premium offered is not ridiculously low).
* It is important that the notice served is a valid one. If the notice is invalid, you will have to wait another 12 months from the date the Notice is withdrawn before you can serve another one.
* The notice served by the tenant should be registered at Land Registry, and will then bind the freeholders, even if the property is sold by the landlord. Conversely, you can sell the flat with the benefit of the right to the lease extension so the purchaser could be the one that actually completes the new lease and pays the premium.