Flat owners told to buy or extend leases

05 January 2010



Many of the country's homeowners are being advised to either extend or buy their leases to avoid financial woes in the future. Property consultants Carter Jonas told the BBC that many flats will have come with 99-year leases, although these will now have unexpired terms of between 50 and 80 years. In practical terms, this will make them hard to either mortgage or sell, the news provider was told.

Anyone thinking of selling their property further down the line needs to exercise their right to extend their lease, the consultants revealed. Failure to do so could mean that a property with an unexpired term below 80 years could find the premiums they are expected to pay are much higher.

Lease extension on flats should be carried out sooner rather than later, Carter Jonas said, as the process is often a lengthy one. Property values have plummeted in recent months, meaning that the compensation a freehold owner is entitled to could be jeopardised. Meanwhile, the consultants indicated that properties with leases of less than 70 years could be even more difficult to sell, as mortgage lenders tend to be against providing capital for flats on short leases. This is mainly because they are perceived as not giving enough security.

Under current legislation, 50 per cent of the marriage value of a property needs to be paid as an element of compensation to the freeholder of the flat. This is ascertained by working out the value of the property once the lease has been extended.

Landlords are entitled to amounts of compensation which are set out by law once a lease is either extended or enfranchised. This, however, will be established based on a range of criteria including the value of the landlord's interest and whether they can get the flat back at the end of the lease with vacant possession, the BBC revealed.

If you require legal advice, for either your private affairs or organisation, please call Buckinghamshire based B P Collins Solicitors on 01753 889995, complete the online enquiry form or email enquiries@bpcollins.co.uk.

Posted by Michael Larcombe

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