TBI Solicitors is advising owners of long leasehold properties to consider

Kerry Goodwin

Kerry Goodwin, property expert with TBI Solicitors, suggests that now is an advantageous time to apply for a lease extension. House prices have fallen by 25 per cent or more, so, for the first time in years, there has been an equivalent reduction in the price payable to the landlord for an extended lease.

Kerry said: “Not only should a lease extension be priced more reasonably to reflect the current state of the market, but a longer lease will make the property more attractive to prospective buyers as the market recovers. It is important not to miss the opportunity presented by the lower property values.”

There are two options available to extend the lease. One option is for the leaseholder to enter into informal discussions with the landlord and achieve a mutually favourable agreement. The second option (provided the term of the lease is more than 21 years and the leaseholder has owned the property for more than 2 years) is that the lease can be extended formally by law. Under a formal extension, the landlord is obliged to extend the lease by 90 years and stop charging ground rent. There may also be the opportunity to correct any mistakes in the original drafting of the lease. The informal agreement may be cheaper initially, but is likely to lead to a shorter lease extension and even an increase in ground rent payable.

“If the formal legal route is followed, the cost of the extension is fixed at the date the lease extension notice is served on the landlord, making it attractive to act now as a number of industry experts are predicting that property prices will soon begin to rise again.”

Consideration must also be given to other factors. Most mortgage lenders will be unwilling to lend against a property with a short lease (70 or fewer years left to run) making it difficult to find a buyer who is able to proceed. Additionally, the closer the term of the lease is to ending, the greater the benefit of that lease to the landlord, and therefore the price will be higher. As such, the costs of securing an extension increase once there are fewer than 85 years left to run can increase substantially year on year. It is possible that the cost of the extension could have doubled in five years time.

Kerry added: “When you consider the evidence, it's hardly surprising that we are receiving a larger number of enquiries from leaseholders. Extend your lease now and your property will be easier to sell when the market recovers. A longer lease, with any problems with the original drafting rectified, will be more attractive to both buyers and lenders. And if you've got savings which are no longer earning any interest, then it could be worthwhile using that money now to extend your lease.”

Anyone interested in finding out more information on lease extensions can contact Kerry Goodwin at TBI Solicitors on 0800 052 6824 or email kgoodwin@tbi.law.co.uk.