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In the Telford area most houses are freehold and most apartments are leasehold. If you already own a leasehold property then you should be aware of the changing sentiment towards them by prospective buyers and lenders. If you are planning to sell a leasehold house you should certainly consider buying the freehold interest or if it is a leasehold apartment buying an extension of the number of years remaining but most important you should do so well before putting it on the market . The reason is that very often the owners of the freehold interest will take advantage of the situation and charge you more than should be the case. But if you leave it too late then you will not have time to negotiate and if necessary take it to the Leasehold Valuation Tribunal. You must remember that in such circumstances the freeholder is generally very reluctant to sell because as time passes it increases the value of the freehold. Valuation is always based upon the fact that at the end of lease the freeholder will own 100% of the value of the property.
There are laws which can be used to compel freeholders but the law works slowly and it is therefore best to start the process the earlier the better and certainly no later than two years before you are planning to sell. Leaseholders have the right to demand the sale to them of the freehold or a lease extension after they have owned for a minimum of two years. There is no longer any requirement that they have to occupy the property and so buy to let landlords enjoy the same rights as owner occupiers.
Many leaseholders feel the owners of the freehold interest overcharge but are unable to do much about it. The issue here is to do with the rapid increase in ground rents which has become a contentious area in recent times. You may own a lease with the ground rent set for a year. However, there are mechanisms stipulated in the contract where this ground rent can increase overtime e.g. it doubles every 10 years. Extending your leasehold sooner rather than later is important and could reduce your ground rent drastically.
Lenders are becoming more conservative on lending against flats which have shorter leases and they will refuse to lend where a lease drops below 60 years. Again, this could render it extremely difficult to re-mortgage or should you wish to sell, a prospective buyer may be unable to obtain a mortgage over the flat.
Owning a long leasehold property is a diminishing asset. The shorter the term becomes, the less it is worth. A lease extension will increase the value of your property and if you wish to sell, a longer term will be more appealing to potential buyers and lenders. Do not leave it until the last minute!
If you are a leaseholder or you are considering a new lease and need advice to avoid falling into any legal pitfalls, please contact Rachel Clements on 01952 297979 or by email firstname.lastname@example.org. Alternatively, a member of our Commercial Property department will be happy to assist.
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