What is a good length of lease?

If you own or are buying a leasehold property, you may be wondering, what is a good length of lease? If the number of years remaining on a lease drops below a certain level, there are disadvantages. We take a look at how many years it is recommended you have on a lease and the options for extending a lease when the time comes.

At Lockings Solicitors, our property team have wide experience in dealing with sales and purchases of leasehold flats and houses.

We hold the Law Society’s Conveyancing Quality Scheme accreditation, acknowledging our expertise in providing quality residential conveyancing advice as well as in risk management. We are known for the excellent level of service we provide and often represent clients over many years as well as being referred to their friends and families.

If you ask us to assist with a leasehold property matter, we will ensure that you have a clear and concise explanation of the work involved and that you receive regular updates as the transaction progresses. We are easy to contact and are always happy to talk through concerns and answer queries.

We offer a FREE initial chat so that you can ask us any questions you may have about the length of your lease and the options open to you if it is not as long as you would like. Call us on 01482 300 200, email us at welcome@lockings.co.uk or fill in our Free Online Enquiry and we will call you back promptly. We have offices in Beverley, Hull and York and represent clients across the East Yorkshire area.

How long is the lease of a leasehold flat or house?

If you own a leasehold flat or house, the freeholder, also known as the landlord owns the land and buildings, referred to as the freehold. As the leaseholder, you have the right to occupy the premises in accordance with the lease. Each lease will state how long you have this right. The length of leases varies, with some for as long as 999 years. It is often the case that modern leases are originally granted for 125 years or 99 years.

What is a good length of lease for a flat or house?

If the number of years remaining on a lease falls towards 80 years, it can mean that a property is harder to sell. The reason for this is that mortgage lenders can be reluctant to lend against properties with around 70-80 years or less remaining.

A property with a shorter lease will also be worth less than one with a longer lease.

What should I do if my lease is not long enough?

Once your lease is approaching 80 years remaining, you may want to consider extending it. Most leaseholders have a legal right to extend their lease once they have owned the property for two years or more.

Another option is to purchase the freehold. If you own a flat, you will need to join in with some or all of the other leaseholders to do this. Once you own the freehold, you can all extend your leases without the need to pay a premium to the landlord, although a premium will be payable to the landlord to purchase the freehold.

Extending a lease

If you use the formal legal route to extend your lease, you have the right to an additional 90 years if your property is a flat and an additional 50 years if your property is a house.

There is a set procedure for exercising the right to extend a lease. You will need to instruct a surveyor to carry out a valuation so that you know how much to offer the landlord for the extension. The valuation will be based on a range of factors, including:

• The length of the lease
• The number of years remaining on the lease
• The ground rent
• The reduction in value of the landlord’s interest because of the lease extension

Once the number of years remaining on a lease falls below 80, an additional premium is payable. This is called the ‘marriage value’. It is calculated by valuing the increase in the value of the property because of the lease extension and is a complex calculation. The marriage value is split equally between the leaseholder and the freeholder, so you would need to pay half of the figure, along with the lease extension premium.

If you would like to extend your lease, you will need to ensure that valuer has the information they need in order to provide a valuation. Your solicitor will then be able to draft a notice to be served on the landlord, advising them that you wish to extend and offering them a figure based on the valuer’s recommendations.

The landlord may ask for a higher amount than you have offered, and, if necessary, your solicitor will negotiate with them or their solicitor to try and reach an agreement.

Buying the freehold

An alternative to asking the landlord to extend the lease is purchasing the freehold. Once you own the freehold, you can either eliminate the lease if your property is a house or extend all of the leases without the need to pay a premium if the property is one of a number of flats.

If you own a flat, you will need at least half of the flat owners to join in with the purchase with you. If there are only two flats in the building, then you must both take part.

Again, a valuer with leasehold expertise will be needed to value the freehold. As a leaseholder, you will usually have the right to buy the freehold if you have owned the property for two years.

The process involves serving a formal notice on the landlord of your wish to exercise your right to buy. If you are a flat owner, then it is common to set up a management company to take over ownership.

Advantages of extending a lease or buying the freehold

There are several advantages to extending a lease or buying the freehold of the property, including:

• Increasing the value of the property
• Making it easier to sell, as buyers and lenders prefer a longer lease or a freehold interest
• Elimination of ground rent – leaseholders are required to pay ground rent, but if you extend your lease, this is reduced to a peppercorn
• If you buy the freehold, then as flat owners, you can reduce the number of rules. For example, your landlord may insist on approving any alterations or they may ban subletting or pets at the property

New legislation

Changes are working their way through Parliament in respect of leasehold property. The Leasehold and Freehold Reform Bill aims to make it quicker and easier to extend a lease or purchase a freehold. It is intended to abolish the marriage value and replace it with a set calculation.

The bill will also abolish the need to own a property for two years before you have the right to extend your lease or buy your freehold.

There is no date scheduled for the final passing of the bill, so if your lease is approaching the 80-year mark or you are thinking of selling your property in the future, you may want to take action now.

Contact our East Yorkshire leasehold property solicitors

If you are considering buying or selling a leasehold property, we will be happy to help.

You can ring us for a FREE initial chat on 01482 300 200, email us at welcome@lockings.co.uk or fill in our Free Online Enquiry and we will call you back promptly. We have offices in Beverley, Hull and York and represent clients across the East Yorkshire area.