The Leasehold Reform Housing and Urban Development Act 1993 gives tenants the right to acquire a lease extension of 90 years on top of the remaining length of the lease at a peppercorn rent. The tenant must meet certain requirements to qualify for a lease extension:-
- Own a long lease ie. A lease which was originally granted for a term of at least 21 years.
- Owned the property for a minimum of 2 years.
The lease runs from the date it was drawn up, not when it was purchased and not the date when the lease was granted. For example, a 99 year lease that was purchased in 2005, 15 years after the lease was actually drawn up (1990) will expire in 2009 – leaving 82 years to run.
So, if your lease currently has 65 years left to run, after extending under the 1993 Act, it will have 155 years. The existing ground rent under the lease will be cancelled out and there will be no ground rent to pay under the new lease. This is called a “peppercorn” ground rent which represents a fictional payment of a small item of value (the peppercorn). In reality, no payment can or will be demanded.
Marriage Fees – 80 Year Trap
80 years is a crucial point in your lease. Once a lease runs below 80 years, even by a single day, the leaseholder’s share of the freehold price can rise significantly.
If a lease has less than 80 years unexpired when you seek to extend it, then as part of the price you will have to pay what is known as a “marriage value” to the freeholder as extending the lease usually adds value to the property. The freeholder/landlord is entitled to half the increase in the value of the property, this is known as a Marriage value or Marriage fee, so-called because the value of the property + longer lease (i.e. when Married together) exceed the combined value of the separate entities. The marriage fee is an estimated value provided by your valuer/surveyor and it's part of the Premium (offer) that you make to the landlord to purchase the lease extension.
Marriage fees are only applicable to leases that have less than 80 years left to run, you should always look to renew a lease before it hits the 80 year mark for this reason.
If you are looking to extend your Lease we have a wealth of experience and offer free initial advice so if you have any questions please contact us for peace of mind on 01926 491 181.