Why would I want to extend my lease?
The length of a lease can significantly affect the value of your flat. The sooner the lease is due to expire, the less your flat may be worth and the more expensive it can be to extend the term of your lease. Sometimes it can be difficult to sell your flat as buyers usually look for a flat with a long unexpired lease and they may find it difficult to get a mortgage if it has a short lease term left. This is because mortgage providers have their own requirements on lease terms before they will offer a mortgage. However, this may not affect you as most of our leases still have many years left to run.
When should I consider extending my lease?
You may have problems selling your flat if it has a remaining term of less than 80 years and most mortgage lenders require an unexpired lease term of at least 60 years.
How long can I extend my lease for?
Under the Leasehold Reform, Housing and Urban Development Act 1993 (The Act), you can add 90 years to the remainder of your lease term. For example, if your lease has 100 years left to run, you can have a new lease for 190 years.
Will the ground rent increase?
No. You will only have to pay what is known as a ‘peppercorn’ ground rent, which means no rent at all. The price that you will pay for the new lease will take this into account.
How much will it cost?
In addition to paying the purchase price to us for the new lease, you will also pay our reasonable legal and surveyor costs and an administration fee.
We will be able to provide you with an estimate of what these costs may be before you make a formal request to purchase a new lease.
What if we cannot agree on how much the new lease should cost?
We will try to reach an agreement with you on what the purchase price will be. However, if this is not possible you can apply to the First Tier Tribunal for a determination on what the price will be.
What do I need to do to purchase a new lease?
1. Check your lease
The lease term will be stated in your lease and you will be able to calculate how many years there are left to run. Please note that the term may not start on the date when the lease was purchased because the first flat sold in the block sets the lease terms for all future flats sold in your block.
2. Check your eligibility
You can extend your lease if you have owned your flat for at least two years.
If you qualify, you can extend your lease for a maximum of 90 years by paying a purchase price for the lease extension.
We do not have to extend your lease if:
- The majority of the leaseholders in the property have applied to obtain the freehold
- Your lease has already expired
- You have sublet your flat on a lease of at least 21 years
- We want to demolish or redevelop the block of flats.
3. Appoint Professional Advisers
It’s recommended that you consider appointing professional advisers to assist you at an early stage. A valuer will be able to advise you on the price you will need to offer for the new lease and a solicitor will be able to deal with the legal aspects for you.
The valuer (usually a chartered surveyor) will calculate the value of the lease extension using the formula set out in the Act. You can contact the Royal Institute of Chartered Surveyors for a list of local surveyors who specialise in lease extensions. Most surveyors will charge a fixed fee to prepare the report which will cover the initial inspection of the flat, reading the lease and making the calculations. For any further work required – such as negotiations with us – their fee will increase.
The solicitor will be able to start the process by serving the Initial Notice on us. The notice will include the amount you wish to pay for the lease extension. At this stage we will require you to pay a deposit of £250 or 10% of the amount that you are offering for the lease extension (whichever is greater).
Please note that once the Initial Notice is served on us, you are responsible for our reasonable valuation and conveyancing costs.
4. Dealing with Us
We have a minimum of two months in which to respond to the Initial Notice with a Counter Notice. If we do not respond within this period you can apply to the county court for an order that the lease extension is granted on the same terms as set out in the Initial Notice.
5. Valuation Agreement
If the valuation figure cannot be agreed you can make an application to the First Tier Tribunal for a decision. This must be made within six months from receipt of a valid Counter Notice. If the valuation cannot be agreed within this period the Initial Notice is considered withdrawn.
Please note that you will have to wait 12 months before making a fresh claim under the Act.
6. How much will the lease extension cost?
This is difficult to say as the value consists of three main elements.
- Compensation to us for loss of Ground Rent
- Compensation to us for not receiving the flat at the end of the lease.
- If there is less than 80 years left to run, ‘marriage value’, which is arrived at by deducting the value of your flat before the lease extension from the new value plus the value of our interest.
Please remember that you’re responsible for our costs as well as your own.
7. How long will it take?
This depends on how efficient everybody is and if the valuation is agreed but it could take up to 12 months. If the court becomes involved this will delay the process but there are legal timescales in place to prevent it from dragging on.
If, after reading this leaflet and having taken your own professional advice, you decide that you want to extend your lease, you should send your written request (Initial Notice) to:
Leasehold Team, Plymouth Community Homes, Plumer House, Tailyour Road, Plymouth, PL6 5DH.
Please note that this is a brief outline of the process. You should take advice from an appropriate professional – such as financial advisers, solicitors and surveyors – before making any decision. Your solicitor will be able to advise and guide you.
For more independent information and guidance on extending your lease, the following independent website is worth visiting www.lease-advice.org.