|August 19, 2020||No Comments|
There are more than 4 million leasehold homes in England according to the Ministry for Housing, Communities and Local Government, and more than two-thirds of these are flats.
Here estate agents Maunder Taylor, who provide expert property valuations for flats in Hertfordshire and North London, look at why tenants in leasehold flats need to be wary of the length of their leases.
Most leases on flats are generally for 99 to 125 years. Once the length of time remaining on the lease dips below the 80-year mark, then the flat becomes what is known as a ‘diminishing asset’ and the value of the property falls sharply. The more the lease runs down, the more expensive it becomes to extend.
If a leaseholder tries to sell their flat they will find it very difficult if they have allowed the length of the lease to run down to below 80 years. It is still possible to sell the property, but the market value will be greatly reduced, and typically you will only be able to sell to a cash purchaser because most mortgage companies will typically not lend against a short lease where there is less than 80 years remaining.
The Leasehold Reform Housing and Urban Development Act, which became law in 1993 entitles the leaseholder to a lease extension of 90 years at a ‘fair market price’, on top of the existing length of the lease. This only applies if the leaseholder has owned the lease for at least two years (even if they have not actually lived in the flat), and if the original lease is for a term longer than 21 years. A successful application will allow leaseholders to extend the length of the lease by another 90 years, and any ground rent which is still being paid will be reduced to a peppercorn figure (i.e. nil). We are aware that the Law Commission has recently recommended to Government that lease extensions should increase the term by an additional 990 years (instead of the additional 90 years) although we are awaiting any legislative changes in this regard.
However, the landlord will need to be compensated for the reduction of their financial stake in the property. The process of determining the value of the flat is a complex matter, which must take into account various statutory assumptions as well as local market conditions. Totteridge estate agents and valuers Maunder Taylor have many years of experience of property valuations in Hertfordshire and North London.
We always try to reach a figure which is satisfactory to both landlord and leaseholder, without recourse to the Tribunal. If the valuation figure is contested, then we can act as expert valuation witnesses or advocates, and we regularly appear for both landlords and leaseholders in contested cases.
Maunder Taylor can also act for leaseholders who club together to buy the freehold of their flats. This means that the leaseholders own their properties outright so they do not have to worry about the lengths of their leases and nor do they have to pay any ground rent. We are happy to act as managing agents, looking after all the communal areas, managing the day-to-day running of the block and administering the service charge income and expenditure.
If you would like to know more about our property valuation services, you should contact either Ross Maunder Taylor MRICS or Jason Mellor DipSurvPract. You can call us at our Whetstone office on 020 8446 0011, or at our Potters Bar office for any residential service charge management enquiries on 01707 665 666.
Alternatively you can click on this link and fill in the online form. We also offer a range of other services, including commercial property management and property insurance.