News On The Block

The value of thousands of flat owners’ properties will reduce if they do nothing and hope for the best. Many leases are dated at the end of the quarter, particularly June and December. If your lease is below 85 years, every year the lease reduces, the cost of a lease extension or freehold purchase rises. Under 80 years, the cost rise accelerates. This can be thousands of pounds a year, eroding the underlying value of the flat over time.

It is simple to preserve the value of your investment, if you act in time. Finalising the cost of a lease extension or freehold is best negotiated by valuers and solicitors who specialise in this area. The negotiation depends on a number of factors; the value of the property, the ground rent due for the remainder of the lease and the lease length. For example, a lease extension of 90 years added to the remaining lease length of a flat worth £200,000 with a £100 annual ground rent could cost approximately £5,000 at 85 years, but £18,000 at 65 years. As the process can take many months a sale can be delayed since the buyer, their solicitor or mortgage lender may insist on a lease extension being in place before completion funds are transferred. If not resolved quickly, the buyer might walk away. Many freeholders rely on flat owners not realising that their lease lengths have slipped to a dangerous level and hope to benefit from the bargaining position this gives them. Be proactive and act now.

Alex Greenslade is Honorary Secretary of ALEP (the Association of Leasehold Enfranchisement Practitioners)