A leasehold is the most common form of flat ownership in England and Wales. The agreement basically means that you own the flat but not the land on which it’s built – instead this is owned by the freeholder (or landlord). You have the right to remain in the property for as long as the lease is valid.
A lease is a wasting asset: as its term dwindles so does the value of your flat. A lease extension reverses this process and allows a tenant to restore a property to its full value.
A long lease typically lasts for 90 years or more, while a short lease is generally considered one that lasts for fewer than 60 years. As a rule of thumb, the less time that remains on a lease the more the value of a property drops. However, extending a lease before you need to can have financial implications too.
70 years or less - if your lease has fewer than 70 years remaining on it, then mortgage rates on the flat are likely to increase, significantly in some cases. This can be a real problem if you want to sell your property because a new buyer will struggle to get a reasonable deal on a loan. Moreover, the value of your property will drop. In such instances, it definitely pays to extend your lease.
60 years or less - The last thing you want to do is to allow your lease to run below 60 years, this will render it almost unmortgageable. If you want to get rid of the property, the best you can hope for is to offload it to a cash buyer or sell it at auction, where you may or may not get a good deal.
Unfortunately, if you want to extend the lease at this stage, it can be extremely costly – potentially tens of thousands of pounds.
On the other hand, nor does it make sense to renew the lease on a property that has 90 years or more. The cost of renewing the lease is likely to be more than that of the potential added value to the property.
Ideally you should start to think about extending your lease when the time remaining gets down to between 80-85 years
The Leasehold Reform, Housing and Urban Development Act 1993 ensures that you, as a leaseholder, are able to extend the lease on your property by 90 years, as long as you meet certain criteria. This includes:
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