When should you extend your Lease?

When the time comes to finally sit down and unwind in the evenings, I, like many people find myself scrolling through the generic property websites to view “the movers and shakers” of what has now sold “Subject to Contract” in my local area. Many freehold properties are remaining on the market for many months before a buyer is found, with some properties falling victim to substantial monthly price reductions in a desperate attempt to secure a sale. Many leaseholders are also facing similar challenges but with the added pressure to ensure that their Leases won’t be the reason that they cannot move on. With the ever-changing requirements of mortgage lenders in relation to what is considered to be “acceptable” in terms of lending criteria, consideration has to be given to not only those more “modern” specific clauses which are required by mortgage lenders of buyers but also the requirements of mortgage lenders where the current leaseholder is needing to remortgage. In this ever-evolving area of law, we often find that Leaseholders who purchase properties many years ago, are now finding that the Lease they purchased is now in fact “defective” and is no longer deemed sufficient to sell or obtain mortgage finance albeit that it was acceptable at the time of their original purchase. One of the main reasons for this is often due to the remaining length of the lease term.  

The lease itself is a “diminishing asset” because it lasts a certain number of years, reducing as time goes on and meaning that longer leases are worth more than shorter ones. Many leaseholders are now finding that it is the number of years remaining which has become their biggest obstacle in being able to find a new buyer or secure mortgage finance. Whilst some lenders are happy to proceed with substantially lower lease terms, these lenders are few and far between and often will not offer the same competitive rates as those being offered by the more established high-street lenders.  

When a property is marketed, the selling agent will not usually have sight of the lease and will rely upon the information provided by the seller regarding the remaining lease term. Unfortunately, the information provided can often be incorrect leading to substantial delays in conveyancing transactions and unforeseen costs incurred by both the buyer and seller. Where problems with a lease are not identified at the early stages of a transaction, this can lead to the expiration of mortgage offers, declined lending for a buyer or worst-case scenario result in an abortive transaction. 

When is the best time to extend my lease to avoid delays and borrowing issues?

We are often asked by clients, when is the best time to extend a lease to avoid any potential transactional delays and problems with future borrowing. It is important to remember that at the time of offer, a buyer will always assume that the price offered is upon the basis that the lease being purchased is of sufficient length and will therefore be deemed acceptable for lending purposes. Often properties sold subject to reduced lease terms will be sold via auction as buyers are not able to secure lending in situations where the seller is not willing or able to deal with an extension of the lease.  Thackray Williams adopt the approach that “prevention is better than cure” so if you are thinking of selling or remortgaging your leasehold property, we would always advise that you firstly check your lease to ascertain the number of years remaining of the lease term.    

How our Leasehold team can help

Our specialist Leasehold team is always on hand to assist you, should you wish to discuss selling or remortgaging your leasehold property and can undertake a “Health Check” of your lease to identify any potential issues which may require improvement.   Please contact myself, Hannah Mooney, or a member of the team on 020 8290 0440.