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Take Advantage of a Weaker Property Market

30 March 2009

Flat owners with long leases should take advantage of the downturn in the property market by extending them, says Kent property lawyer Andrew Gough.

Andrew, partner and head of commercial property at leading regional law firm Furley Page, explains: “The cost of extension is partly determined by the value of the property so it’s cheaper to do it when market values are low.

“If your lease has more than 80 years left to run, taking prompt action will avoid ‘marriage’ value whereby the freeholder is entitled to 50% of any uplift in value resulting in a lease extension or freehold purchase.“

Most leases run for 99 or 125 years but once they have less than 80 years left, the cost of buying an extension increases.

Extending leases can make the property more saleable and attractive to a mortgagee, says Andrew who points out that lenders are reluctant to lend to someone purchasing a short lease. Usually the term has to be at least two and a half times the period of the loan so sellers with longer leaseholds could see more interest from potential buyers who then stand a greater chance of getting a loan.

Another option in weaker market times is to agree with owners of neighbouring flats to collectively buy the freehold. This gives you the advantage of managing maintenance and service charges and even a better control over your budget.
 
For further information contact Andrew Gough on 01227 763939.

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