Adding Value to Your Flat in a Falling Market
Now could be the perfect time for flat owners to increase the length of their lease which can make their property more saleable.
Philip Rowland, a leasehold specialist for Adams & Remers, says: “In a market where selling property is difficult, it makes sense for flat owners to protect their investment by using their statutory right to extend a lease. This right applies not only to resident flat owners, but also non-resident, buy-to-let investors who have owned their flat for a minimum of two years.
He continues, “The premium payable to a landlord for extending a long residential lease is linked to how much a flat is worth, it could be a very cost-effective move while property prices have fallen.”
The benefits of extending a lease include:
- Making a flat more attractive to potential buyers who will not have to worry about extending the lease themselves.
- Lenders are reluctant to lend against flats with only short terms remaining, making it much harder to sell the flat.
- It will often increase the value of the flat by more than the cost of the lease extension.
- No ground rent is payable under an extended lease, saving the flat owner money every year of their ownership.
Flat owners should be aware, however, that the cost of extending their lease will increase continually as the term shortens. It is also inadvisable to wait until selling the flat to consider extending the lease as this will strengthen the landlord’s bargaining position and could slow down a prospective sale.
Philip Rowland advises: “It is always a good idea to take early legal and valuation advice. Landlords will sometimes offer lease extensions directly to tenants on what appear to be reasonable terms but which are in fact disadvantageous to the flat owners. We’ve heard of cases, for example, where new leases have been offered with ground rents 40 times higher than those currently payable, when in fact the rent should be reduced to nothing.
“Finally,” says Philip Rowland, “flat owners may also wish to take advice on other options open to them such as clubbing together with other tenants to buy the freehold and so gain not only lease extensions but management control of the building.”