SLUMP GOOD NEWS FOR FLAT OWNERS 

Solicitors are advising flat owners with long leases to take advantage of lower property values and extend their leases. Leases should be extended now, as the property value is a very significant factor in determining the cost of extending the lease or buying the freehold.

Flat owners could actually benefit from the lower prices in the market. Most leases run for 99 years, but once they have less than 80 years left to run the cost of buying a lease extension increases significantly. However, it is possible to extend the lease and it is cheaper to do so when the market values are low, as the cost of extending is partly determined by the value of the property.  Extending the lease could make it more saleable, so leaseholders should contact us and look into extending their term even if they are not planning on selling straight away.

Delaying it could hit flat owners with a double whammy. When property prices go up and the length of time left on the lease has gone down, it will be more expensive to extend it.

Once a leaseholder has been in the property for two years they have a right to extend the term. However, there are circumstances whereby extending the leasehold might not be possible. Our property solicitors will be able to advise on this.

Lending

As banks and other lenders continue to restrict lending, anyone wishing to sell their leasehold will find buyers harder to come by. Extending the lease is likely to help their cause.  Lenders are reluctant to lend to a buyer purchasing a short lease, as mortgages tend to require the lease to be at least two-and-a-half times the length of the loan. A lender is unlikely to offer a 25 year loan on a lease that has 35 years to run.

Sellers with longer leaseholds could see more interest from potential buyers who stand a much greater chance of obtaining a loan.

5 February 2009

Disclaimer

The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.