Wednesday, 26 February 2014
Start early to secure your investment
Andrew Oranjuik from Martin-Kaye Solicitors, said it was never too early to be thinking about the length of a lease.
“Almost all flats have long leasehold agreements on them which can typically be 99 or even 125 years, which of course sounds like a lifetime away. But what happens when the lease comes to an end? The short answer is that the flat has to be handed back to the owner of the building.
“To ensure tenants are protected though, they have a legal right to extend the period of their leases by up to 90 years, as long as they pay a premium. And even though you may think the end of the lease is light years away, it’s in your best interest to renegotiate at the earliest possible opportunity.”
Andrew said early discussions were advisable as the premium payable to the owner of the building increases as the time left on the lease decreases.
“Mortgage lenders are often reluctant to lend against leases where there is only a short term left on the lease too, and buyers are also unlikely to want to buy a leasehold flat with just a few years left on the agreement.”
He said the premium payable to the owner of the building in order to extend a lease is calculated using a complex formula linked to the value of the flat itself.
“You’ll find that the premium increases significantly once the lease term drops below 80 years, so the sooner you start negotiating, the better. So check the small print and act as soon as possible, ideally while there is at least 80 years still left on your deal, as this will preserve or even improve the value of the property.
“It will be money well spent and you will have safeguarded your position, putting your mind at rest that you’ll be able to live in the property for many years to come.”