Increase the Value of Your Flat by Assigning Your Right to Lease Extension

If you are going to sell your leasehold property, make sure you have a long lease - if it is below 70 years, you should consider extending your lease. This is because mortgage lenders frequently won't lend on less than this - a fact that tends to deter potential buyers. A lease also becomes problematical when there are less than 80 years left as you will have to pay a 'marriage value' premium to extend it, something that increases the cost of extension considerably.

In light of the above an extension is a positive move. However, what happens when you want a quick sale of your property and have not got the time to sit through the extension process? This is where the option of assignment may be relevant. The lease extension process can take anything from 2 to 6 months. If you have already got a purchase offer from a buyer based on the fact that the lease is being extended, you can assign the right to extend the lease over to them.

What is an assignment of the right to extension?

Assignment occurs where your right to the leasehold extension is legally passed over to the buyer of the property and the future leaseholder. This means that they can take over from you the extension process when they buy the house. Hopefully this will result in the purchaser moving in immediately, an outcome that will satisfy everybody (including their mortgage lender). Your leasehold extension solicitor will be able to deal with the legal documentation to instrument the assignment.

You may have to check that your landlord is happy with the assignment before you proceed and this may turn out to be somewhat of a negotiation point. However if you are planning on selling the property to this particular purchaser then the landlord should have a good reason as to they would differentiate between you extending and the new leaseholder.

How do I start the extension process?

The first step will be to get a valuation and/or survey for the property. This will give you an idea of how much the extension is worth and will provide a starting point for the negotiations with the freeholder. The value of the extension is usually calculated by the following things; firstly compensation for the landlord for the loss of ground rent over the remaining term of the lease and secondly compensation for the landlord for not obtaining his freehold interest at the end of the original period. As mentioned above, if your lease has less than 80 years left to run then you will also have to factor in a marriage value premium.

You must then find and retain a specialist solicitor who knows all about how to extend a lease. Your solicitor will handle the legal side of things and serve notice on your landlord as well as look after the following sale to the buyer. Not only this, but they will also conduct negotiations over the value of your extension on your behalf with your landlord. If you and your landlord are unable to agree upon a valuation for the extension then you will have to make an application to appear before a Leasehold Valuation Tribunal. This is more expensive so if you can, you should try and come to a friendly arrangement with the landlord.

You should be aware that the leaseholder is responsible for paying his/her own legal fees, the reasonable costs of the landlord in dealing with the notice for extension and the landlord's legal fees. Although this may seem excessive, you must compare the amount to be spent against not having to pay ground rent again and the increase in value that the extension will bring to your property.

One thing to be aware of is that you must apply for a leasehold extension before your lease comes to an end. Once your lease has ended you become an assured tenant and you are no longer a. the owner of the property or b. entitled to extend the leasehold.