I read a great article by MAP Chartered Surveyors this week which explained how extending your lease will in most cases increase your properties market value. I thought I would share the contents of the article with you as I feel so many local residents are still not fully aware how a short lease can impact the value of their property:
Do you own a leasehold flat? Then spare a moment to consider whether you should be extending the lease. If you purchased the flat with 99 years or less unexpired then it will certainly be in your best interests to extend the lease before the unexpired term falls below 80 years. If you are thinking of selling your flat within the next few years then a longer lease will certainly make the property more saleable and also increase the market value of the property. Provided that you qualify under the terms of the Leasehold Reform, Housing and Urban Development Act 1993 then you are legally entitled to purchase a ninety year extension to the existing lease term at a new peppercorn (zero) ground rent for the whole of the new term. Thus, if you currently have a lease term of 70 years unexpired with an annual ground rent of £50, the extended lease would be for 160 years with a peppercorn (zero) ground rent.
The premium to purchase an extension to the lease is assessed by calculating the present value to the freeholder of the future ground rent payable under the existing lease, plus the present value of what the flat would be worth at the end of the existing lease when the flat would otherwise have been handed back to the freeholder. This is known as the reversionary value.
If the present lease has less than 80 years unexpired then the freeholder is also entitled to a 50% share of the marriage value. In simple terms, the marriage value is the difference between the value of the flat with a long lease, and the value of the flat with a short lease, on the assumption that the lessee has no rights under the 1993 Act. The value of the premium obviously varies depending on the various figures and yields applied. Under the terms of the 1993 Act, the lessee will also be responsible for the freeholder's reasonable legal and valuation costs in dealing with the matter.
It is therefore very important that the amount of the premium is assessed accurately and professionally.
MAP offer a fast and efficient service to value the premium necessary to purchase an extension to the existing lease. They can provide you with a report which explains the process, lets you know what your next step in the procedure should be and are also able to suggest solicitors who specialise in lease extension work, including the serving of notices.
MAP Chartered Surveyors can be contacted on 0845 6344187 for a free initial telephone consultation and advice as to what your next step should be.
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Paul Long (Director & Author of The Sidcup Property Blog)