Sussex Lease Extensions Blog

Re-Negotiating a Lease Extension

The UK property market remains cautious after the recession. The majority of lenders now require much longer unexpired lease terms than ever before for a property to be considered suitable mortgage security, with many not lending upon terms less than 70 years unexpired. Solicitors and Surveyors acting for purchasers will advise clients not to purchase property with less than 85 years unexpired lease terms, without either having a lease extension in place or agreeing a suitably reduced purchase price to reflect the shorter unexpired lease term. Costs of obtaining a statutory lease extension on a property increase considerably as the lease term reduces further.

Lease Extension Valuation

Specialist lease extension surveyors can guide you through the tricky process of applying to your landlord for a lease extension. The valuation process will look at the property’s eligibility and the costs the landlord is entitled to. These costs will include:

  • Any decrease in value of freeholders interest, including the loss of ground rent which reverts to a peppercorn (nil) once the lease extension has been granted
  • The loss of reversionary value to the freeholder due to the lease being extended
  • The marriage value – created from the merging of the existing leasehold interest with the new extended leasehold interest (only applicable where the lease has less than 80 years unexpired remaining)

Lease Extension Negotiation

Once formal notice has been served on the freeholder to claim a statutory lease extension and the freeholder can serve a counter notice. There is a maximum period of 6 months for the negotiation of terms between the parties including the premium. At any time after the initial 2 month period, either party can refer the matter to the Leasehold Valuation Tribunal (LVT) for determination. The LVT will then hear the cases and cross examinations from the parties and then make a determination based upon the evidence provided and their knowledge and experience. Freeholders mostly try and avoid LVT determinations as they have to bear their own costs and may receive less premium than via a negotiated settlement. Therefore the vast majority of cases are settled without an LVT hearing.

 

This entry was posted on Friday, July 19th, 2013 at 9:51 am and is filed under Leasehold Valuation Tribunal, Statutory Lease Extensions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.