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leaselength


must beaminimumterm left on thelease. Thelengthoflease required canvary, butthe majority ofmainstreammortgagelenders generallyrefusetolendonlease termsofless than 55 years. Different lenders have varying criteria, but prospective purchasers will be less likelytoaccept ashorter leaseandmay find it difficult to secure lendingwhichmeans that aflat with ashort leaseisonlylikelyto be of interest to cash buyers. Re-mortgaging may also be prohibitive until the lease term is extended beyond the minimumterm your lender requires.Re-mortgagingmay well be possible withoutanextendedlease butthe consequencemay be a higher rate of interest costingyou moreinthe long term. Allthismeans that it pays to be awareof


thelengthofyourlease.However,ifyour lease is getting close to the 80-year threshold, don’t panic – assuming that you qualify, you are entitled under the Leasehold Reform, Housingand UrbanDevelopmentAct 1993 to extend your lease by 90 years in addition to theunexpired term at apeppercorn ground rent (ie, nil), in return for a premium. Tomeet thecriteria, theflatmust be held underalong


thepremiumthat you need to pay to extendit increases.


lease(ie, originally grantedfor atermofmore than 21 years) andthe flatmusthavebeen ownedand registeredatthe Land Registry for more than two years.


In granting thelease extension,


compensation is payabletothe landlord for thereduction of hisinterest in theproperty. This comprisesthe loss of ground rent forthe remainder of the term, plus the reversionary valueofthe property once thelease expires. Where theexistinglease has less than 80 yearsunexpired,you also paythe landlord 50% of the marriage value.


CanI sell a flat


wIth a short lease? If you want to sell a flat with a short lease, it is possible to serveaSection 42 Notice fora lease extension, and to then pass this on or ‘assignthe benefit of theNotice’ to thebuyer upon completion.Thismakes thepropertya farmoreappealing propositiontoabuyer but he or shemust take advice froma specialist enfranchisementadvisor as anymistakemade during theprocesscan be fatalfor theclaim andresultinapurchaser taking on aflat that will be even harder to sell in future. Thelandlord is usuallyservedwitha


section42noticeafter exchange to ensure the buyeriscommitted.Atcompletion, theparties executeaDeed of Assignmentofthe Benefit of theNotice. This is notthe sameasaDeed


50


of Assignment. The Deed enables the buyer to step into the seller’s shoes upon completion andcontinuewiththe leaseextension process as if thebuyer hadowned theflat fortwo years.


CanIbuyaflatwItha shortleaseandextend


It at the sametIme? Therearemany reasonswhy somepurchasers arekeentobuy shortleaseholdproperty. By usingthe 1993 Actitispossible to spread capitalpaymentsacrosstwo transactions,


flat owners often don’t consider lease length until they want to sell their home


which can reduce theamount of Stamp Duty as thetax is paid pertransaction andnot in aggregate. Themarketfor short leaseholdpropertyisquite specialisedand can sometimesmean there is less competition for thepurchaseofthe flat. Also,marriagevalue is at its greatestwhen the lease is between 30- 40 years unexpired, so the potential benefits areattheir peak. Ideallyaprospective buyerislooking to buy


aflatwherethe seller has ownedthe leasefor morethantwo years. Note that they would need to waitfor twoyears fromthedateof registration at theLandRegistryshouldthey decide to extend the lease after the purchase of the property. Many flatownersdon’t ever consider the


length of their lease until they attempt to sell or re-mortgage their flat. Short leases affect thevalue andsaleability of aflat andcan cause issues with mortgage lenders. So don’t waituntil youare thinking ofmoving -check the length of your lease before it becomes a problem.●


Forfurtheradviceandinformation, pleasecontactKatie Cohen PartnerLeaseholdEnfranchisement katiecohen@childandchild.co.uk tel 0207201 1865


Issue 16 Flat Living


...as thelengthofthe unexpiredtermofa leasegetsshorter,


Jargon Buster


Whatismarriage value?Marriagevalueispayable


whentheexistingleasehasatermof less than80years remaining.Theconcept ofmarriagevalueis that thetotal valueisworthmorethanthe sumofthelandlordand


tenant interestsinthesame property.The1993Act


requiresthat this“uplift” issharedequally betweenthe landlordand tenant.


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