At some point a long lease will need to be extended (unless it has a term of 999 years) because as its term reduces it becomes more difficult to sell a property and a loss of capital value occurs in parallel. There are a number of things to consider when looking to extend a lease:
If the lease has over 80 years remaining then taking action before it drops to 80 years remaining will avoid the payment of what is known as marriage value which is where the freeholder is compensated for the loss of ground rent. Leaseholders can either choose a statutory lease extension of 90 years added to the unexpired term (if they have owned the property for two years or more) and pay no more ground rent or make an informal request to the freeholder. The latter is not recommended because the freeholder may appear to offer more favourable terms if the leaseholder asks for less than 90 years but will likely increase the ground rent. There will also be no time frames by which each stage of the process needs to be completed.
A lease cannot be extended if:
- The landlord is a charitable housing trust and the flat is provided as part of the charity’s functions;
- The building in which the flat is located is within a cathedral precinct, or if it is owned by The National Trust.