In the UK we have two types of property ownership Freehold and Leasehold
With Freehold you own the whole of your property.
With leasehold you tend to share some parts of it with other people. A shared entrance or roof perhaps, hallways, gardens water pipes or whatever.
The reason leases exist is to create a link between the owners of the various flats in a building so that someone (usually the Landlord) can make everyone comply with their obligations to repair and maintain their own flat and contribute to the cost of maintaining, insuring heating and lighting etc the shared or common parts.
There are other ways of doing this and other countries do it without leases. But in the UK we are stuck with them.
The drawback to leases is that they are for a fixed term and will eventually run out. When they so you may be able to continue living in the flat as a tenant but you lose your real ownership and therefore a lot of the value of the property.
Originally people thought a 99 or a 125 year lease was long enough not to have to worry about it expiring, but recently people have started to get concerned about the length of their lease even when there are still many years left to run.
The main reason for this is that a landlord will always charge a fee for extending a lease back to a longer term and the amount of that fee increases as the lease gets shorter.
A lease with 95 years left on it may only cost a £2,000 or £3,000 to extend back to 125 years.
One with 89 years left on it may cost £3,000 or £4,000.
But once you go below 80 years, the cost starts to shoot up. Mainly because below 80 years and the freeholder is entitled to a share of the increase in the value of the flat should the lease be extended. So the cost may suddenly be £10,000 or £20,000 or more depending on the value of the property.
A flat with only 30 or so years left on its lease may cost £100,000 or a great deal more to extend.
So, if you are thinking of selling a flat with a lease under 90 years, try and get the lease extension sorted out well before you put it on the market. It can take months or more to deal with an extension and its best not to try and do it at the same time as selling as it puts you under unnecessary pressure.
If you are thinking of buying a flat with a short lease, make sure you find out before you commit yourself what a lease extension will cost and take that into account when making your offer.
For more detailed advice go to our specialist website at www.lease-experts.co.uk
Don't just jump in and ask your freeholder for a lease extension. Their response will almost always be "How much are you offering"
We will advise you how to find out what a fair price for the extension would be.
We will advise you how to make the first approach
We will advise if you have a right to a lease extension
To be a Qualifying leaseholder you must own a long lease and have owned it for the past two years.
You don't have to live in the property. Buy to let investors have the same rights.
Most leasehold properties are included in the lease extension rules as they are "long leases"