What is a leasehold extension?

A leasehold extension is the process of extending the lease term of a property held on a leasehold basis. It helps maintain the property's value and desirability. Leasehold extension legislation allows leaseholders to extend their lease, ensuring the property remains attractive for sale or mortgage purposes.

How long is a leasehold extension ?

The length of a leasehold extension can vary depending on the jurisdiction and specific circumstances. In some countries, such as the United Kingdom, leasehold extensions are typically granted for an additional 90 years beyond the remaining term of the existing lease. However, it's important to note that leasehold extension regulations can differ, and it's advisable to consult local laws or seek professional advice like leasehold valuations for accurate information regarding leasehold extensions in a specific jurisdiction.

What are the benefits of lease extension ?

Extending the leasehold of a property offers benefits such as increased property value, improved marketability, easier access to mortgage financing, peace of mind and security, the avoidance of escalating costs, and more control over property management.

What happens to leasehold property after 99 years ?

After 99 years, the leasehold property typically reverts back to the freeholder, unless the lease is extended by the leaseholder. The ownership of the property, along with the land it is built on, returns to the freeholder once the lease expires. As a lease approaches its expiration, the property’s value may decrease, making it more challenging to sell or mortgage. It is advisable for leaseholders to consider extending their lease well before it reaches the 99-year mark to maintain the property’s value and their ownership rights.

Why choose leasehold Valuations for Lease extension or Buying Freehold ?

1. Fair Price: A leasehold valuation ensures you pay a fair price for a lease extension or freehold purchase.2. Increased Property Value: Extending the lease or buying the freehold can potentially increase your property’s value.3. Cost Savings: Accurate valuation helps minimise future costs like ground rent.4. Stronger Negotiation: A valuation report strengthens your position during negotiations with landlords.5. Legal Compliance: Valuations ensure you meet legal requirements for lease extensions or freehold purchases.6. Future Planning: Valuations help you plan for selling or passing on the property to future generations.7. Expert Advice: Engaging a valuer provides access to their expertise and guidance.8. Mortgage Support: Valuation reports improve your mortgage opportunities for lease extensions or freehold purchases.

How much does it cost to renew a leasehold ?

The cost of renewing a leasehold in the UK can vary depending on various factors, such as the property value, the length of the renewal term, and any negotiations between the leaseholder and the freeholder. Unlike extending a lease, which typically involves paying a premium to the freeholder, renewing a lease generally involves paying a nominal fee known as a “peppercorn rent” or a small percentage of the property value.The exact cost of renewing a leasehold will depend on the specific terms agreed upon between the parties involved. It is advisable to consult with a solicitor or a licenced conveyancer who specialises in leasehold matters to get an accurate estimate of the costs involved based on your particular situation.

Q. How much does it cost to extend a leasehold in uk ?

The cost of extending a leasehold in the UK can range from a few thousand pounds to tens of thousands of pounds, depending on factors such as the remaining lease length, property value, and negotiated terms with the freeholder. Additional costs include legal fees, valuation fees, and disbursements such as Land Registry fees. It’s recommended to seek professional advice for an accurate estimate based on your specific situation.

How to Calculate a Lease Extension Valuation?

July 25, 2024

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Calculating a lease extension valuation is a crucial step for leaseholders looking to extend their lease. The valuation process determines the premium payable to the freeholder for extending the lease, and it involves several factors and a specific methodology. In this blog, we will explore the key elements involved in calculating a lease extension valuation, providing leaseholders with a comprehensive understanding of the process.

Understanding Lease Extension Valuation

Lease extension valuation is the process of determining the premium that leaseholders must pay to the freeholder to extend the term of their lease. This is particularly important for leases with less than 80 years remaining, as the cost of extending the lease can increase significantly once the lease term drops below this threshold.

Factors Influencing Lease Extension Valuation

Current Lease Length: The remaining term of the lease is a critical factor. Shorter leases generally result in higher premiums.
Ground Rent: The annual ground rent paid by the leaseholder. Higher ground rents typically increase the premium.
Reversionary Value: The value of the property at the end of the lease term, assuming the leaseholder does not extend the lease.
Marriage Value: The potential increase in the property’s value once the lease is extended. This is particularly relevant for leases with less than 80 years remaining.

Valuation Method

The valuation of a lease extension is based on a specific formula that considers the factors mentioned above. The formula is as follows:

Premium = PV of Ground Rent + PV of Reversionary Value + Marriage Value

PV (Present Value) of Ground Rent: This is the present value of the future ground rent payments over the remaining lease term.
PV of Reversionary Value: This is the present value of the property at the end of the lease term, discounted back to the present day.
Marriage Value: This is the increase in the property’s value after the lease is extended. It is typically shared equally between the leaseholder and the freeholder if the lease has less than 80 years remaining.

Steps to Calculate Lease Extension Valuation

Hire a Professional Surveyor: Engage a qualified surveyor experienced in lease extension valuations. They will use the appropriate methodology and consider all relevant factors.
Gather Information: Provide the surveyor with details about the current lease term, ground rent, and property value.
Valuation Report: The surveyor will produce a detailed valuation report, outlining the calculated premium and the methodology used.

Importance of Professional Valuation

Accurately calculating the lease extension premium requires expertise and experience. Professional surveyors ensure that all factors are considered, providing a fair and accurate valuation. This is crucial for negotiations with the freeholder and for any legal proceedings that may follow.

Use Our Free Online Lease Extension Calculator

For a quick estimate, you can use our free online Leasehold Extension Calculator. This tool provides an approximate premium based on your input, giving you a preliminary understanding of the costs involved.

Lease Extension Valuation Table

Factor	Description	Impact on Freehold Value
Current Lease Length	Remaining term of the lease	Shorter lease = Higher premium
Ground Rent	Annual ground rent paid by leaseholder	Higher ground rent = Higher premium
Reversionary Value	Property value at the end of the lease term	Higher reversionary value = Higher premium
Marriage Value	Increase in property value after lease extension	Relevant for leases < 80 years

Conclusion

Calculating a lease extension valuation is a vital step for leaseholders looking to extend their lease. By understanding the factors involved and engaging a professional surveyor, leaseholders can ensure a fair and accurate valuation. Leasehold Valuations offers expert guidance and valuation services, helping you navigate this process with confidence. Contact us today for a lease extension valuation and take the first step towards securing your property’s future.