Throughout the UK, short residential leases are a ticking time bomb for unsuspecting homeowners, potentially wiping tens of thousands of pounds from property values. Yet, this problem can easily be avoided by simply extending the lease before it falls under 80 years - a legal process that, if done correctly, can pay for itself many times over when it's time to sell up.
Robert Plant, Commercial Property Partner at leading law firm Tolhurst Fisher LLP advises that 'Under the 1993 Leasehold Reform Act, qualifying tenants have the statutory right to extend the lease on their property by 90 years, plus the present unexpired term. So, for a lease with 90 years left, this would be extended to 180 years, and all at a peppercorn rent - a small token payment used to fulfil the requirements of a legal contract.'
Why act before the lease reaches 80 years? For the extension of any lease below this length, legislation entitles the freeholder to 50% of the marriage value. This is the increase in the property's value on completion of the lease extension.
Naturally, the shorter the lease becomes, the bigger the rise in value, with the leaseholder facing a much larger bill to extend it. For any lease greater than 80 years, the marriage value is deemed to be nil.
In a turbulent economic climate, therefore, it is crucial for leaseholders to act now to protect their investment, rather than later. It is a point highlighted by the plight faced by many leaseholders in the process of moving home.
Sensing their desperation to sell, unscrupulous freeholders have been known to delay the process and even enter into costly private arrangements knowing they have the leaseholder over the proverbial barrel.
The lease extension process begins with a notice served to the landlord and normally takes around six months. In reality, the experience should be hassle-free for the leaseholder, providing everything is done correctly.
Lease extension is a specialised area of law and very time sensitive. Any delays or errors could cost anywhere between a few hundred to thousands of pounds, with the leaseholder forced to wait 12 months before the process can be restarted. Therefore, choosing the right solicitor is an absolute must.
Tolhurst Fisher is a leading law enfranchisement law practice and a member of the Association of Leasehold Enfranchisement Practitioners, with extensive specialist knowledge of all aspects of lease extension. This includes experience in representing clients throughout the leasehold valuation tribunal process.
