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    What is a lease extension?

    Most flats and maisonettes in England and Wales are leasehold properties where the property is ‘leased’ to you, the leaseholder, by the landlord (the freeholder) for a fixed term, usually between 99 and 125 years. If the lease has not been extended, ownership of the property will eventually revert back to the freeholder once the lease comes to an end, leaving the leaseholder empty handed.

    Why is it important to extend your lease?

    Lease extension helps to safeguard the future value of your residential property. It is advisable to extend a residential lease whilst there are still 85-95 years remaining. Whilst residential leases shorter than 85 years can still be extended, they become more expensive each year. Less than 80 years remaining on lease makes lease extension significantly more expensive.

    The value of a leasehold property decreases as the lease gets shorter, compared to a similar property that has a longer lease. Estate agents will also tell you that trying to sell a leasehold property with less than 90 years remaining is significantly more difficult than attempting to sell one that has more than 100 years remaining on the lease. This is due to the fact that it can be more difficult for purchasers to secure a mortgage against a property with a shorter lease, as well as the fact many purchasers, investors included, consider a shorter lease a risk. Where the property can be sold its value is likely to be diminished.

    It will likely be more difficult to sell your property due to buyers being put-off by the shorter lease and the perceived risk that buying a property with a shorter lease entails. A shorter lease is also likely to be used by buyers a tool to negotiate down the sale price. If you are considering selling in the next few years, think about extending your lease first.

    It can be more difficult to re-mortgage a leasehold property which has a shorter lease. Something to consider if you are thinking about re-mortgaging the property in the next few years. In this instance it is advisable to extend your lease first and many lenders might would require this.

    The important 80 year threshold for lease extensions

    You are strongly advised to extend your lease before it falls below 80 years, at which point it becomes significantly more expensive to extend your lease. It is recommended you extend your lease whilst you have 85-95 years still remaining.

    Under the 1993 Leasehold Reform Act, if a lease is renewed with less than 80 years remaining, the leaseholder must compensate the freeholder by paying an additional fee called a ‘marriage fee’, which is equal to 50% of the increase in value derived from the lease being extended. For example, if the value of a property increases by £20,000 due to the lease being extended (where the lease has less than 80 years remaining), the leaseholder must pay 50% of that increased value (i.e. £10,000) to the freeholder, in addition to other costs.

    This additional ‘Marriage fee’ (£10,000 in this example) does not apply and is not payable if a lease is extended whilst still having more than 80 years remaining.

    Extending your lease reduces your ground rent

    An added benefit of extending a lease under the 1993 Leasehold Reform Act (the statutory route) is the replacement of the ground rent with a ‘peppercorn rent’, this reduces the ground rent you pay for the remainder of the lease.

    Your right to extend the lease on your property

    Qualifying leaseholders have a right to apply for a lease extension of 90 years under the 1993 Leasehold Reform Act. The process can commence by approaching the freeholder informally or more formally through the service of a Section 42 Notice. In either case it is recommended the approach is made through a lease extension solicitor as negotiations regarding values can become contentious and should the ‘Marriage’ value not be applicable, attempts may be made by the freeholder to delay or reject the application if it is not properly prepared.

    Is your lease close to 80 years?

    If your lease is close to the 80 year threshold, it is strongly advised you involve a specialist lease extension solicitor who can progress the lease extension promptly, so that you avoid additional costs associated with the previously mentioned ‘marriage value’.

    Our Residential Lease Services

    Whether you are a new tenant or an existing tenant whose lease is due to come to an end, it is imperative that you have a knowledgeable legal expert on hand who can provide you with accurate advice.

    We can advise you on the implications of if the lease is up for renewal (rather than a periodic review). In many cases, the mechanism for what happens next will be governed by the Landlord and Tenant Act 1954 (unless specifically excluded). This act gives tenants the right to a new lease on similar terms to the existing lease with an updated rent.

    We can assist you with all aspects of taking a lease of a property, whether you are an experienced tenant or embarking on a new business venture. Our expert commercial property solicitors will give you clear, concise and practical advice tailored to suit you.

    Our areas of expertise include the following:

    • Negotiating and advising on heads of terms
    • Drafting and negotiating new leases, renewal leases and agreements for lease
    • Negotiating licences for alterations including advice on reinstatement provisions
    • Making a licence to assign applications including advice on the conditions a landlord may be able to attach to any consent
    • Advising on break clause issues
    • Advising on rent reviews, service charge and security of tenure issues
    • Advising on “green lease” clauses and The Green Deal
    • Advising on issues affecting the landlord’s title such as rights of light and covenants
    • Drafting and negotiating deeds of variation and surrenders of leases

    We can assist you if you are a landlord with a property which is let and coming up for renewal of the lease and you have received papers from the tenants seeking a renewal

    Leases for commercial property are often relatively complex and it is important that you fully understand the implications and obligations, in order to avoid costly mistakes. Imperial solicitors have a wealth of experience in dealing with commercial lease renewals.

    Our experienced commercial lease solicitors have helped landlords with the following:

    • Providing advice on heads of terms
    • Drafting and negotiating new leases, renewal leases and agreements for lease
    • Drafting licences for alterations including advice on reinstatement provisions
    • Dealing with a licence to assign applications including advice on the conditions you may be able to attach to any consent
    • Advising on break clause issues, rent reviews, service charge provisions and security of tenure
    • Advising on “green lease” clauses and The Green Deal

    Contact our Residential Lease Solicitors in Morden, Surrey to discuss lease extensions today. Call 020 3773 5116 or email us at [email protected]

    We are located at a 2-minute walk from Morden Underground Station, conveniently accessible from Central London on Northern Line.

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