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Facts
* The shorter the remaining term of the lease,
the more difficult it will be to sell the property or for
potential buyers to raise the finance
* Potential lenders usually require a minimum
term of lease at outset of a mortgage facility and, also,
require a 30+ years left on the lease at maturity of the mortgage
term
* Properties in prime areas of Central London,
typically, have leases attached to them with less than 30
years remaining (some have much shorter remaining terms)
* Since the Commonhold & Leasehold Reform
Act 2002, it has been easier for an owner of a short leasehold
property to extend the term of the existing lease, if he/she
has owned the property for two or more years
* Few lenders have identified and responded
to this niche lending opportunity; those that have done so,
consider the location of the property and the status of the
freeholder to be important factors in the mortgage application
process
* Quality estate agents and valuers, experienced
solicitors and enlightened independent mortgage advisers will
all have significant roles to play in this business arena
Financing the Extension of a Short Lease
A freeholder will require a monetary consideration
in order to extend a lease and there are, essentially, three
options for making that payment:
* Pay the premium to the freeholder out of
one's own financial resources
* Apply to one's existing lender for a 'further
advance' in addition to the existing mortgage
* Apply to another lender for a re-mortgage
to pay off one's existing borrowing and raise the additional
amount required to pay the freeholder
A lending institution will value the property
on the bases of its current short lease and also the future
increased lease term.
If approved, the mortgage will be based upon
the revised lease term and, when the funds are released to
the acting solicitor's client account, the new lease will
be executed simultaneously.
The processes of purchasing, re-mortgaging or extending the
leases of short leasehold properties require the services
of knowledgeable and experienced advisers.
There is a slowly-increasing awareness of
the market opportunity by a few of the more forward-thinking
and flexible lending institutions.
A huge amount of prime Central London property
is short leasehold, owned by highly reputable freeholders
that have embraced the enfranchisement Act.
In future, those potential buyers of short
leasehold properties or those wishing to extend their existing
leases can do so knowing that professional and experienced
support is available to them.
What
is a Lease? |
Are
There Different Types of Leases? |
Extending
a residential lease |
How
do I extend the lease?|
How
much will it cost? | Lease
Extension |
Car
and Vehicle Leasing |
Example
of Lease Agreement |
Extension
of Short Leases on Central London Properties |
Rental
Challenges |
