Brady Solicitors’ lease extension expert Lesley Brentnall considers leaseholders’ options in light of a recent judgment that brings into question the rising costs of extending a lease.
The decision was made in the cases of Sloane Stanley Estate v Mundy & Lagesse and Aaron v Wellcome Trust Ltd 2016 and was in favour of higher valuation methods, which means leaseholders face increased costs when extending their lease, especially when the lease has a term of less than 80 years remaining.
Whilst solicitors are not involved in the valuation aspect of lease extensions, they can help to negotiate the terms of the lease, which ultimately offers leaseholders options in the face of these recent cases.
How does the lease term impact the value of the property?
Leases are granted to the leaseholders for a set term such as 99 or 125 years. Calculations for a lease extension are based on a number of factors but the keys ones are the property value and the age of the lease.
Once a lease has less than 80 years left something called “marriage value” applies to any valuation, which makes the lease considerably more expensive to extend.
Sloane Stanley Estates v Mundy & Lagesse and Aaron v Wellcome Trust Ltd 2016
These cases were heard together as they all applied to leaseholders of London flats who disputed the valuation method used to calculate the cost of their lease extensions. They asked the Upper Tribunal to reconsider the valuation method by using a revised graph that had more relevant data than the original valuation method used.
However, the Upper Tribunal rejected the proposal despite the fact they acknowledged that none of the existing industry standard graphs are ideal for calculating lease extensions. Had the alternative valuation method been used, it would have undoubtedly have reduced the cost of a lease extension for those properties with less than 80 years left on the lease.
The decision reached by the Upper Tribunal relies on a valuation method which was heavily in the favour of the freeholder. Leaseholders, especially in high value areas such as London, will now feel that their options to extend their lease and protect the value of their property are limited.
Your lease extension options
Despite the Upper Tribunal favouring the freeholders in this case, leaseholders should not be dismayed. As property prices increase it’s important be prepared to extend your lease sooner rather than later, as the sooner you act on extending your lease the less you are likely to have to pay to the freeholder.
Using lease extension specialists
We advise using specialist lease extension solicitors who understand freeholder tactics. Using specialist solicitors ensures you can achieve the best value lease extension and protect your interest in your property.
If you want to get ahead on your lease extension or consider your options Lesley Brentnall will be happy to advise you, call 0115 985 3450 or email here.
Read more about how Lesley’s lease extension expertise helped save a flat sale from falling through.