Is it time to check the length of your lease?
Jan 23, 2018
When you take out a lease on a property, you are buying the right to use it for a certain period of time. This is often seen as a drawback of this form of home ownership, and it can certainly present challenges. But the limited shelf life of a typical lease need not be a reason to abandon a proposed purchase.
There are leases and there are leases, and we have seen pretty much every type there is – including those that have such little time to run that they would make for a very bad acquisition indeed. As property solicitors, we’re able to steer clients away from these, or help them negotiate something sensible.
But this all begins with getting to the detail of the lease and understanding exactly what you would be taking on. In particular, what is the effect of the length of the lease on its value and viability?
A lease which has a relatively short amount of time (less than about 80 years) to run usually raises some alarm bells. It’s not an automatic deal-breaker, but it does mean that there will be additional considerations when it comes to funding the purchase; lenders are less keen to grant mortgages on short leases.
The solution in some situations is for the lease to be extended. A leaseholder looking to sell a relatively unattractive lease will usually investigate this. Because if the cost of agreeing an extension with the landlord is proportionate to the benefit to be gained by then being able to sell the lease, it will be a good commercial move.
And that isn’t just something for a leaseholder to consider in the lead-up to a sale. You could ask your landlord to extend the lease at any time and, in fact, it makes sense to keep a close eye on the unexpired term as time goes by. Negotiating an extension (usually of 90 years on a flat, or 50 years on a house) should add significant value to your interest in the property. By contrast, allowing the clock to tick down could mean that you are left with a lease that is, to all intents and purposes, unsellable.
So, whether you are the current owner of a lease, or you’re looking to buy a property under a leasehold arrangement, the length of the lease really matters. Property lawyers like us deal with these issues all the time; we know the steps that should be taken to protect your interests, and we’ll help you take them.
Contact our Property Team today on 01264 353411, email: firstname.lastname@example.org or complete our online enquiry form, with no obligation and we will be happy to assist you further.
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