Residential Property Leases: Short term Leases Are a Cause for Concern!
Birmingham conveyancing solicitor Sunny Bains scrutinises leasehold properties and lender requirements.
Lenders have specific requirements in respect of the minimum unexpired term of a lease upon which they are prepared to lend against. The minimum term varies from lender to lender. In certain circumstances, this can be a minimum term of 80 years. As a matter of course, the unexpired term should be one of the first things to consider even before thinking about making an offer on a property. The unexpired term may not pose any problem at the time of purchase but may affect a future sale.
Owner Rights and Extending a Lease
There is a statutory right (subject to certain eligibility criteria) for a tenant of a residential property to extend their lease by a further 90 years. That is to say, 90 years in addition to the current unexpired term. The main criterion is that the tenant needs to have owned a long lease (a lease granted for more than 21 years) for at least two years. However, it is possible for the tenant (who already meets the eligibility criteria through his length of ownership) to commence the process. The claim can then be assigned onto a buyer on completion of the purchase. The buyer carries on and completes the extension process with the landlord. Any premium and costs required are duly paid. If a lease extension is handled in this way there is no need for a buyer to wait the two-year period in order to extend the lease.
The Value of an Extended Lease
The extended lease (with an additional 90 years) should, in theory, be more valuable than the lease in its current form. The other advantage to a statutory extension of lease is that the ground rent payable under the existing lease is reduced to one peppercorn. In effect, this means no ground rent is actually payable. However this does not reduce or waiver liability in respect of other sums. Other sums may include a service charge, reserved under the existing lease.
Professional Conveyancing Legal Advice
It is important when purchasing leasehold property that suitably qualified advice is sought. At RLK Solicitors Limited we have experience in dealing with leasehold sales and purchases. Our Birmingham conveyancing solicitors are adept with all legal aspects of statutory lease extensions. Please contact our Property Team at Rubric Lois King for further advice. Call 0121 450 7800 or send an email to: enquiries@rlksolicitors.com.
* This article does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to provide information on issues that may be of interest. Specialist legal advice should always be sought in any particular case.*
