The Association of Leasehold Enfranchisement Practitioners constantly reminds flat owners that they can save thousands of pounds just by checking their leases still have sufficient years to run.
Many leases are dated at the end of the quarter, June and December seem the most popular dates. If your lease has less than 85 years to run, every year that the lease reduces, the cost of extending your lease or buying the freehold rises. Under 80 years, the cost rises at an accelerating rate.
Alex Greenslade, Honorary Secretary of ALEP, said: “Depending on the value of your property, the cost of extending the lease or buying the freehold can rise by hundreds or even thousands of pounds a year. Just occasionally we learn that some leaseholders without realising it have left their leasehold to run down so much, they no longer own the property they thought was theirs.”
He continued: “Yet it is so simple to preserve the value of your investment, if you act in time. Before the end of the year when we all make resolutions to do things we’ve been putting off seems just as good as any. Finalising the cost of a lease extension or freehold is best negotiated by valuers and solicitors who specialise in this area. The negotiation depends on a number of factors, including the value of the property, the ground rent due for the remainder of the lease and the lease length.”
An example of how much it could cost to delay extending a lease or buying the freehold is as follows:
Current value of property £200,000 (with a £100 ground rent per annum). Approximate cost to extend lease by adding 90 years and reducing ground rent to zero:
At 85 years – £7,000
At 75 years – £9,000
At 70 years – £12,000
At 65 years – £17,000
Another reason not to delay is that the process of extending a lease can take many months, particularly if the freeholder takes a tough stance in negotiations. A sale can be delayed by a lease extension, since the buyer, their solicitor or mortgage lender may insist on a lease extension being in place before completion funds can be transferred. If the lease length cannot be resolved quickly, the buyer might just walk away.
All in all it pays to be proactive, not reactive. Many freeholders rely on flat owners not realising that their lease lengths have slipped to a dangerous level and hope to benefit from the bargaining position this gives them.