LEASE EXTENSION - IGNORE IT AT YOUR PERIL
People who bought flats in the 1970s and 1980s on relatively short leases of 125 years have been warned about a potential lease extension timebomb.
Leaseholders have rights in law to extend their leases by 90 years (Leasehold Reform Housing and Urban Development Act, 1993) but the costs of doing so can jump dramatically once the unexpired term of the lease gets below 80 years.
One of the main reasons for the big jump in costs when extending a lease of 80 years or less is that valuers must take into account marriage value. This is a measure of the potential for increase in the value of the flat arising from the grant of the new lease, and it has to be shared 50:50 between the parties. Marriage value does not apply when the unexpired term is still over 80 years.
In the calculation of the marriage value the leaseholders' and landlord's valuers will use local knowledge and experience to assess the increase in value of the flat arising from the new lease. However, you can get a ballpark idea of the cost of extending your lease by using the quick calculator on the Leasehold Advisory Service (LEASE) website www.lease-advice.org
LEASE advisory board director Genevieve Mariner, head of the Enfranchisement and Leasehold Reform team at chartered surveyors Strettons said: "Many flat owners put off the expense of lease extension, but they should be aware of the 80-year timebomb."