How do I extend my lease?
If you are a shared owner or leaseholder you will have a lease for your property. A lease is a contract that allows you to use a property for a specified term, normally 99 or 125 years. The original lease term will decrease over time and as the term gets shorter you may be in a position where you will need to increase the length of the term of the lease.
Why is this important? Some mortgage lenders may be reluctant to lend money against a lease with a short term, making the sale of your home more difficult. This varies considerably with different lenders. As an example, some lenders will request an extension on a lease with 80 years left (in order to lend funds against the property) whilst other lenders may request a lease extension on a lease with a term of 50 years remaining.
You may qualify for a statutory right to extend your lease but there are a number of conditions that you will need to satisfy – one of them is that you must have owned the property for at least two years. Shared ownership leases do not qualify for lease extensions unless you have staircased to 100%.You will normally need to appoint a valuer and a solicitor to extend your lease. A valuer will help establish the cost of extending the lease and a solicitor will need to serve notice on us, stating your intentions as well as undertaking other necessary legal work. Your solicitor and our solicitor will then aim to come to a mutual agreement on the price of a new lease. You would need to cover the cost of the valuation and Magna’s legal fees as well as your own.
Under the requirements of the Leasehold Reform, Housing and Urban Development Act 1993, we are required to extend your lease for 90 years plus the remaining life of your existing lease (e.g. if you still have 70 years left on your lease your new lease will be for 70 years + 90 years = 160 years). You will be responsible for your legal fees as well as reasonable costs incurred with extending the lease.
If you don’t qualify for a statutory right to extend your lease, Magna will be happy to consider a request to extend outside of the statutory regime. This applies to shared ownership leases too. In such cases, you would need to cover the cost of Magna obtaining a valuation to determine the price for the additional years and you would also need to cover Magna’s legal fees as well as your own for documenting the extension.
Please note that there will be an increase in the premium payable for the extension where the remaining term of the lease has dropped below 80 years.
We would always recommend that you seek independent advice from a solicitor who specialises in lease extensions to deal with your enquiries.
If you would like further information on lease extensions, please contact us.