The Announcement: should I extend my lease now or wait?
Should leaseholders extend their lease now or wait?
The Government announced big changes to the procedure for lease extensions yesterday. Please see our blog for full details: https://www.meaby.co.uk/leasehold-reform-big-changes-announced/
The announcement poses the question should leaseholders extend their lease now or wait? A number of factors needed to be considered and it will depend on the circumstances in each case.
The Government’s announcement is a basic bullet point list of its intention. There is no guarantee what or when (if at all). Please bear this in mind when making your decision.
Firstly, it is not clear whether 990-year premiums will be at a higher premium than those of 90-year extensions under the current rules. Surveyors have reported to us that there is not a great deal of difference in valuation terms between 90 years plus the residue and 990 years but you’d need to check this point with a surveyor. We’d also observe that we doubt that the market value of a flat would be impacted much by 90 years plus the residue and 990 years but this would be a point to check with an estate agent who is better placed to give their opinion on marketability. As far as lenders are concerned, we doubt they care provided that the lease term is as per their requirements and 90 years plus the residue is likely to satisfy them. If you acquire a lease extension under 90 years plus the residue, you’re unlikely to have to extend in your lifetime anyway.
Secondly, the cap on the ground rent (“a peppercorn”) is already the position now so there has been no change in this regard.
Thirdly, many of our clients have asked whether this will be retrospective. We simply do not know. Therefore, if you continue an ongoing lease extension claim you are safest to assume that the terms will be as per the current law.
Fourthly, leaseholders who have already begun the process of extending their lease may have already incurred significant costs such as surveyors and legal fees. Here, it may be worth considering proceeding due to the expenditure already incurred. The press release refers to making this process cheaper but we have no detail on this. Tenants who abandon the process now will have to pay their own and the Landlord’s costs now under the old regime. We do not know what the future costs may be.
Our fifth point concerns whether will it be cheaper if you wait? Possibly, yes if your lease term has less than 80 years left to run or had 80 years left to run at the point that you served a notice. The calculation of the premium for a lease extension with a term of 80 years or less left to run is more expensive. We shan’t explain why here as it is detailed and complicated. If your lease has or had less than 80 years then it may be cheaper to wait for the new rules. However, we cannot say how much cheaper it would be, when the new rules will come in and what those new rules will look like.
What should I do if I’m in the middle of a lease extension?
If you’re already in the middle of the lease extension process or considering whether to start that process you may query what is best for you to do. That process will probably be finalised before any new law receives royal asset. There may be pressing reasons for extending your lease now, for example solving a problem that makes it difficult for you to sell or refinance your property. You may wish to consider whether you are in a position to withdraw your claim and start again.
If you would like to discuss extending your lease, please contact the Leasehold Property Team: brose@meaby.co.uk or ncleightonhills@meaby.co.uk or call 0207 703 5034.
