People living in leasehold properties should extend the remaining terms of their leases before they drop beneath 80 years, according to a legal expert.
Kerwoods Solicitors says that failing to do this could result in large bills and protracted, expensive legal battles, as highlighted by a recent Court of Appeal ruling.
The case of Mundy v The Sloane Stanley Estate was based on a small Chelsea flat that had only 23 years remaining on its lease, and where appeal judges upheld the freeholder’s claim for a £420,000 payment to extend the terms.
Veronica Du'Quesnay, head of residential conveyancing at Redditch-based Kerwoods, says: “Most leases start at 99 years, and so can be easily forgotten about. But once the time left on the lease drops beneath 80 years, what’s known as ‘marriage values’ apply.
“This means that the freeholder is entitled to half of any increase in the home’s value that happens as a result of extending the lease, which in today’s spiralling property market can cost the leaseholder a lot of money.”
As well as ‘marriage values’, Du'Quesnay says allowing a lease to fall under 80 year could have other financial impacts if the home-owner wants to move house.
“The closer the lease gets to the 80-year barrier, the harder it will be to sell – which means the value of your home will start to decline.
“This is because many banks and building societies are reluctant to consider mortgages on properties of less than 70 years.”