Newspaper article The Journal (Newcastle, England)

Is Your Lease Term Long Enough? Rukhsanah Haroon Explains the Process of Extending the Lease on a Property

Newspaper article The Journal (Newcastle, England)

Is Your Lease Term Long Enough? Rukhsanah Haroon Explains the Process of Extending the Lease on a Property

Article excerpt

IF you own a leasehold property where the lease has less than 80 years to run, you should give serious consideration as to whether to extend the lease.

Leasehold extension is the process of extending a lease on a property by paying the landlord or freeholder a sum of money which is sometimes referred to as "compensation".

This might seem strange, given that you are probably not going to be around when the lease expires, but if you do not act, you could find that the value of your property may be reduced considerably.

The remaining length of a lease is often overlooked in the early stages of marketing a leasehold property - estate agents often don't see a lease extension as much of an issue, but buyers do. The reason for this is that most potential buyers will take out a mortgage to buy a property and most lenders require a lengthy amount of time remaining on any leasehold property before they will consider providing a mortgage on it.

The required length of lease varies from lender to lender and it will be the policy of an individual lender which will determine the length of a lease required.

Problems have arisen over the last few years because mortgage lenders keep increasing their requirements for the length of an unexpired term. For instance, Halifax plc - one of the largest lenders - requires there to be at least 70 years left on the term of the lease, while many lenders require the mortgage term plus 35 years.

Owners will find that even in fairly modern properties the unexpired term of their lease is too short for lenders' requirements, or that buyers are worried that they will be affected when they come to sell and frequently ask for sellers to arrange for an extension of the lease term.

The Leasehold Reform Housing and Urban Development Act 1993 (as amended) allows almost all owners of leasehold property once they have owned their property for two years to extend their lease on the same terms as their existing one. …

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