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.
It’s a Diminishing Asset
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.
It’s More Difficult to Sell or Remortgage
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. It is still possible to sell the property, but the market value will be greatly reduced, usually by several thousands of pounds.
Re-mortgaging the flat can also be difficult with a shorter lease. Depending on the number of years left on the lease, some mortgage providers will not lend.
What Should Tenants Do?
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 been in possession of the lease for at least two years (not necessarily having lived in the flat), and the original lease ran for at least 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.
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 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 any tribunals or courts. If the valuation figure is contested, then we can act as expert valuation witnesses or advocates.
Buying the Freehold
Maunder Taylor can also act for leaseholders who club together to buy the freehold of their flats. This means that the tenants 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 setting a fair service charge.
Property Valuations in Hertfordshire and London from Maunder Taylor
If you would like to know more about our property valuation services, you should contact either Bruce Maunder Taylor FRICS MAE or Jason Mellor DipSurvPract. You can call us at our Whetstone office on 020 8446 0011, or our Potters Bar office for any residential service charge management queries on 01707 665666 .
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.