Lease extension – how to calculate the premium

by Property 118

12:46 PM, 31st May 2012
About 7 years ago

Lease extension – how to calculate the premium

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Lease extension – how to calculate the premium

Most lenders insist that a term of at least 35 years must exist on a lease in addition to the required mortgage term. Therefore, if a borrower requests a 25 year mortgage term the remaining lease term must be at least 60 years. If the remaining lease term is shorter, the lease will need to be extended to make the property mortgageable. The process of extending a lease can also add significant value to a property. Todays good news it that the cost of lease extension is now far easier to calculate.

How much does it cost to extend a residential lease?

Until now this hasn’t been easy to work out. However, Brethertons solicitors, has simplified matters significantly by adding a residential Lease Extension Calculator to its website. The lease extension calculator allows leaseholders to estimate the premium which may be charged for extending the term of their lease by 90 years. Best of all, it’s free to use!

A lease grants the leaseholder the right to occupy the property for the term stated in the lease, the freeholder owns the building, the leaseholders owns a right to occupy space within the building for an agreed term. The term of the lease decreases so at some point the lease will become so short that a lender will not provide a mortgage to allow someone to purchase the property. Surprisingly, this could be with as little as 70 years unexpired. In this situation the lease must be extended and to do so a premium is paid to the freeholder.

Enfranchisement solicitor Roger Hardwick told us: “An enormous amount of effort has been put into our lease extension calculator and I am delighted with the result. It provides leaseholders and landlords alike with a quick and easy method of estimating the value of a lease extension. Our calculator can make extremely detailed assessments by altering the deferment rate. This is something not usually seen in other lease extension calculators. “

Roger continued “The Brethertons Lease Extension Calculator is an easy-to-use application, which allows the leaseholder to quickly and simply estimate the premium payable for an extension. We continually strive to improve the service we provide to our clients and this is another clear demonstration the firm’s continuing commitment to progress and innovation.”

We have included the Brethertons Lease Extension Premium Calculator to the Legal section of our website in order provide yet another useful free tool for our subscribers. You can try it for yourself by clicking HERE



Comments

22:57 PM, 16th May 2013
About 6 years ago

i have tried to use your lease extention calculator and it doesnt work

Mark Alexander

8:35 AM, 17th May 2013
About 6 years ago

Hi Erden

The Lease Calculator is provided by Brethertons solicitors website. I have just tested it myself and it seems to be working OK now.

18:40 PM, 18th May 2013
About 6 years ago

I have now just managed to use your calculator put all my details in which is a studio flat worth £135000 with a 67 year lease and £25 and your calculator has quoted £42000 which we know is wrong as all other calculators show between 8-10 £ why does yours show so high you are harming your business by having an inaccurate calculator and frigthening people that dont know any better.

20:26 PM, 24th May 2013
About 6 years ago

Hey Erden, have you tried http://www.fridaysmove.com/lease-extension-calculator/calculator-page-1

It reckons it will be between £25 and £28k. Had to guess ground rent at £100pa and a value of £160k once extended. These things have a material impact of course but the figure is somewhere between this site and the others you have received

Puzzler

16:30 PM, 20th August 2013
About 5 years ago

http://www.lease-advice.org/calculator/

This one gives £10 to £11K which seems about right.

I would use that as it is a government funded site not a solicitor touting for work. It has been around for a number of years so the information has been out there for a while.

Also there are a number of lenders who will permit shorter leases:

http://www.cml.org.uk/cml/handbook/englandandwales/question-list/321

Vanessa Warwick

16:39 PM, 20th August 2013
About 5 years ago

Property Tribes has a free lease extension calculator that helps you estimate the complete cost of a lease extension, from start to finish:

http://le-ptribes.utdgroup.com/

Gareth Thomas

23:55 PM, 20th August 2013
About 5 years ago

The trouble with this calculator is that it requires your contact details which means it is really a thinly-veiled lead capture device.

Such a pity they couldn't just give us the calculator without making us complete our contact details but if we wanted to get in touch with them they could still offer us a way to do so.

Vanessa Warwick

7:36 AM, 21st August 2013
About 5 years ago

Hi Gareth,

With respect, its not "thinly veiled". It is what it is.

If you don't like it, then you are not obliged to use it.

However, it seeks to find the most cost effective way of extending a lease, so it seems a fair trade to me.

I recently interacted with a "guru" on-line and he took that as my consent to add me to his mailing list which I found incredibly rude! I prefer the email capture approach that I voluntarily sign up for, and actually delivers some value to me.

Annette Stone

17:59 PM, 21st August 2013
About 5 years ago

I don't think that any of the comments made so far deal with the many, many variables which can be put into play with a lease extension which I am not going to discuss here because each case is different.

The calculator is a basic guide but it is provided by a solicitor who would obviously like the business which is fair enough. Everyone is in business to make money.

What the calculator cannot tell you is the ancillary costs as the lessee has to pay the legal and valuation costs of both himself AND the freeholder and on a normal sort of lease extension these can often add up to around £3K if not more. If the matter cannot be resolved with a minimum of negotiation then each side has to argue the case at Tribunal and if experts are to be appointed thousands can be added to the costs and these are borne by the lessee and the freeholder and are not recoverable other than in exceptional circumstances

I deal with around 50 lease extensions each year acting for client freeholders and also for lessees wishing to extend lessees. The only thing that is certain is that each case is different and on this occasion I agree with Puzzler that the Government calculator is as good as any although it does not allow for rising ground rents which can add significantly to the premium.

Puzzler

19:10 PM, 21st August 2013
About 5 years ago

Reply to the comment left by "Gareth Thomas" at "20/08/2013 - 23:55":

See the government site on my post above which does not ask for any personal details

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