If you own or are buying a flat with less than 80 years on the lease then you should be taking action to protect what is likely to be your most valuable asset.
Leases are set for a number of years and like sand in an hour glass will eventually run out and revert to the freeholder. It’s a downward spiral – as the lease gets shorter its value decreases and it becomes more expensive to extend. Ideally you should take action while the lease is just over 80 years – it will certainly cost you less than if you wait until it drops below 80 years and you have to pay additional Marriage Value to the landlord (see our blog on Marriage Value).
Fortunately the Leasehold Reform Act came in to force in 1993 to give leaseholders the right to extend their lease. As you as you have owned your flat for a minimum of two years then you have a right to a 90 year lease extension at a peppercorn or nil ground rent. There’s nothing to stop you agreeing the cost of the lease extension by private agreement but you should be cautious if you take this route as when no statutory notice is served the landlord is likely to ask for an inflated premium as well as an increase in the ground rents.
If you decide to extend your lease under the 1993 Act the process is regulated and relatively simple if you take expert advice from an independent valuer and solicitor. You should also be aware that if you want to sell your property you can serve a formal section 42 notice and assign the right to the lease extension to the incoming buyer. This can be key in securing a successful sale as without this a buyer wouldn’t have the same legal rights as your for another two years.
Don’t be put off by the costs involved – look at the lease extension as an investment which will increase the value of your property by thousands and make it more attractive to potential purchasers. If you sit back and do nothing you will struggle to sell a property with a short lease and anything under 75 years will potentially be unmortgageable.