Do you own a leasehold property, typically a flat or maisonette? The number of years left to run on the lease are a key component of the property’s market value, and there may come a time when a lease extension would make sense. So, what can you do?

Many leaseholders are unaware that they have a legal right to extend the lease on their property. Should you decide to approach the freeholder or the management agent direct with a request for a lease extension, chances are that they may offer you a restored 99-year term and revised ground rent clauses in return for a non-negotiable premium to be paid. But don’t be in a hurry to accept their terms because you may be able to do better.

If you have owned the property for more than two years and meet certain other eligibility criteria, you have the right to a statutory lease extension under the terms of the 1993 Leasehold Reform Housing & Urban Development Act. What does it all mean? Let’s take a look at some of the key questions you should be asking.

1. Why would you want to extend the lease term?

By default, leasehold property is a depreciating asset. As the lease runs down, the value of the property decreases, while the cost of any lease extension increases. Ultimately, when the lease term expires, property ownership reverts back to the freeholder, though this rarely happens in practice.

An unexpired term of 80 years or less is considered by many to be unacceptable, since it makes the property hard to mortgage, remortgage or sell on. Mortgage companies have specific lending criteria and many simply refuse to provide the funds for a property of less than 70 years or so to run (exact figures vary between lenders).

2. What does a statutory lease extension achieve?

A statutory lease extension provides a 90-year extension on top of the existing unexpired lease term. Say your lease has 74 years remaining, a statutory lease extension will give you a new term of 164 years. In addition, ground rent will be reduced to zero for the duration of the lease, while the premium payable to the freeholder is determined by Schedule 13 of the Act.

Finally, if you extend your lease before the unexpired term has reached 80 years, no marriage value (50% of the difference in value before and after the lease extension) is payable as part of the premium, thus further reducing the amount due to the freeholder.

3. Are you eligible for a statutory lease extension?

In order to qualify for a statutory lease extension, you must have owned the property for at least 2 years, while the lease term must have been more than 21 years when it was originally granted. How many years are left to run on the lease is not relevant. The legislation only applies to residential property, not a business or commercial lease. Importantly, the property will not qualify for a statutory lease extension if the landlord is a charitable housing trust and your flat is provided as part of the charity’s work.

If you are in the process of buying a short-lease property, there is a way to get around the 2-year ownership clause. Assuming the seller has owned the property for more than 2 years, he can initiate the statutory process and assign the benefit to you as part of the contract of sale.

4. How do you start the statutory lease extension process?

To get the ball rolling, a lease extension valuation must be carried out on the property in order to determine how much to offer the freeholder, and to give you an idea of the financial liability involved. Once this has been done, your solicitor will serve a formal S42 Notice on the freeholder to initiate the process.

The freeholder than has 2 months in which to serve a Counter Notice, which will typically request a higher premium payment. Thereafter follows a 6-month negotiation period to reach agreement, though either part can refer the matter to the Leasehold Valuation Tribunal (LVT) after 2 months. In our experience, the vast majority of cases are settled without the need for a formal hearing. It should be noted that you will be responsible for the freeholder’s valuation fee and legal fees as well as your own.

5. How can Able Surveyors help?

As experienced lease extension surveyors in London and the Home Counties, Able Surveyors can help you navigate this complex procedure, ensuring that fair freeholder compensation is negotiated. We specialise in carrying out the requisite lease extension premium valuations, entering into negotiations with the freeholder on your behalf and, where necessary, preparing for and representing your interests at Tribunal.

If you have any questions about extending the lease on your property, need advice on buying a freehold property or would like expert assistance with any surveying matter, please don’t hesitate to get in touch.

Are you looking to by a flat, either for your own use as a home or as a buy-to-let investment? Flats including apartments and maisonettes are generally sold on a leasehold basis, and the length of the remaining lease has a big impact on the property value. The price of a short lease property, therefore, may be appealing. However, before you go ahead with the purchase of a short lease flat, it is highly recommended that you do your homework to fully understand the legal and financial implications you are taking on.

What constitutes a short lease?

Residential leasehold properties usually have an initial lease term of 99 years or more. 125 years and even 999 years are also quite common. Properties with less than 70-80 years left to run are generally regarded as having a short lease. Of course, this doesn’t prevent these types of flats from being sold. In fact, properties with leases of as little as 5 years or less remaining still happily change hands.

That being said, the point is that leasehold property is, by definition, a depreciating asset. This means that ownership of the property will revert to the freeholder once the lease term has expired, unless the lease is extended in time.

How to extend a short lease

The good news is that leasehold owners have a statutory right to extend the lease of their property under the Leasehold Reform, Housing and Urban Development Act 1993. “A lease extension under the 1993 Act gives the leaseholder the right to an additional 90 years on top of their remaining term at a peppercorn ground rent,” explains one expert in the field.

To qualify for a statutory lease extension, the original lease term must have been at least 21 years, and the leaseholder must have owned the property for at least 2 years. Of course, this is of little use to a prospective buyer, but all is not lost. If the seller fulfils the eligibility criteria, you can request that they initiate a statutory lease extension as a condition of purchase. This benefit can then be assigned to you on completion of the sale.

Outside of the statutory framework, there is nothing to stop the leaseholder from approaching the freeholder with an informal request for a lease extension. In this scenario, there’s no need to wait 2 years and any private agreement reached between leaseholder and freeholder will be perfectly valid in law, albeit without the statutory protection.

Should you let the lease run down?

A lease extension is not always the right course of action; there are certain circumstances where it might make sense to let the lease run down. Short lease flats may be an attractive option for retirees and homebuyers who have no-one to leave their estate too after death, meaning they don’t need to worry about protecting the value of their property asset.

Short lease properties can also make very attractive buy-to-let investments. The profit made from renting out the flat for the remainder of the lease term can amount to a multiple of the initial purchase price. Once the lease is up, the property reverts back to the freeholder.

That said, short lease flats are often in a poor state of repair and may require extensive (and expensive!) refurbishments before they become a viable rental property, while service charges and ground rent may be considerable. Make sure you know exactly what you are buying.

Can you get a mortgage for a short lease flat?

Unfortunately, it is rather difficult to obtain a mortgage for a flat with a short lease. Lenders typically refer to the years remaining on the lease as the ‘minimum expired lease term’ and the shortest term acceptable will vary between mortgage companies. The majority of lenders consider a short lease to be one that has fewer than 75-85 years remaining. “You may be able to find a provider willing to lend on a 65-year lease, but this is very rare,” advises one mortgage comparison website.

Speak to an experienced mortgage broker to investigate all possibilities including specialist lenders and shorter mortgage terms, and be prepared to pay much higher mortgage interest rates to cover the lender’s additional risk.

What are your options?

Given the difficulties of securing a mortgage, short lease flats tend to be sold at auction rather than through the traditional estate agent route. Auction buys can be financially attractive and if you are able to pay cash for the flat, it could make the property a good investment.

However, don’t forget to factor in the cost of having to extend the lease yourself, which can be substantial. The shorter the remaining term, the higher the cost of a lease extension. If you include lawyers’ and surveyors’ fees, the cost can run into £10,000s for a property with 60-70 years left, rising steeply for shorter leases. Here’s a handy calculator to help you do the initial sums.

Your best option would be to ask the seller to initiate statutory lease extension proceedings before the completion of sale, and come to an agreement regarding cost sharing.

If you’ve had your offer accepted on the purchase of your next home, it’s tempting to think it’s all plain sailing from here. Let the estate agent hand over to the conveyancers to do the legal bit, get the mortgage approved and sign on the dotted line, yes? Actually, no – at least, not yet.

The property transaction won’t become legally binding until contracts are exchanged, and before that happens, we urge you to commission an independent home survey. With one of our experienced building surveyors investigating the condition of the property and delivering their findings in a detailed report to you, you can make key decisions on whether and how to proceed with the purchase.

Bad survey results

Speaking from many years’ experience in the property surveying business, it is by no means unusual for a survey to flag up problems with the building that the buyer is unaware of. From structural issues such as subsidence, damp, timber and roof defects to invasive garden species including the dreaded Japanese knotweed, a bad survey result can certainly take the shine off your new home.

If you decide to go ahead with the purchase in full knowledge of the facts, you may want to reconsider the price in light of the survey findings – and you are absolutely within your rights to do so. Your offer to purchase is ‘subject to contract’, which includes the results of any survey that is undertaken. If defects in the construction are identified, or our surveyors have highlighted that repairs are needed, then these will clearly affect the property value.

How will the vendor and their agent react?

Estate agents are a hardy sort; they’ve probably seen every conceivable building problem under the sun and are unlikely to be fazed by your request to renegotiate the price on account of a ‘bad’ survey result.

What’s more, the agent won’t have been aware of issues with the property when they valued it for sale, so when new information comes to light that has a bearing on the value, asking for a discount is not an unreasonable request.

The vendor and their estate agent should certainly not dismiss your concerns. After all, you could pull out of the transaction at any point before contracts are exchanged – do they really want to risk losing you as a buyer? And if the property does go back on the market, other buyers are bound to find the same defects.

How to renegotiate a previously accepted offer

If you are serious about asking for a discount, don’t just tell the estate agent over the phone and ask them to pass the message on to the vendor. Instead, take the formal route and put your request in writing, explaining that you are putting forward a new offer as a result of the findings provided by an independent RICS Chartered Surveyor.

It is worth emphasising in your letter that you are still very much committed to the purchase, but that you are not prepared to pay the full agreed price when serious defects were found and repairs are clearly needed. You can also add a polite note to say that other buyers would face the same problem.

Hopefully, the vendor will realise how inconvenient, time consuming and costly it would be to have to find a new buyer, and be motivated to accommodate your request.

What your letter should contain

Your best approach to successfully renegotiate the purchase price with the seller is to construct your arguments on evidence-based facts and deliver these politely but clearly.

• List all the serious defects highlighted in the property survey along with their associated costs of repair, such as are included in our Level 3 RICS Building Survey.
• By way of evidence, it’s worth providing a copy of the specific pages of the survey report that relate to the repairs. There’s no need to supply a copy of the whole survey to the estate agent or the vendor.
• Total the costs and decide on what you would consider a reasonable discount off the original accepted offer price. You may decide to claim for the entire cost of repairs, or come to a cost sharing agreement with the vendor.
• In order to strengthen your proposal and renegotiation chances still further, include the name of any contractors who have given quotes.

In receipt of your fully considered proposal, the seller will now need to consider their options and get back to you within a few days, so as not to risk derailing their sale. All you can do now is to keep your fingers crossed, and remain flexible in reaching a mutually agreement outcome to your negotiations, so that your home purchase can stay on track.

At Able Surveyors, we have 25+ years’ experience providing expert advice and guidance to prospective home buyers to help them make the right decision, and we can assist you too. Contact us to discuss your specific requirements and let us advise on the best choice of RICS home survey – Condition Report, HomeBuyer Report or Building Survey. We look forward to hearing from you.

Subsidence is one of those fearful words that no homebuyer wants to hear. But what exactly does it mean for the property, and what can you do about it? At Able Surveyors, we are experienced at detecting signs of subsidence in properties of all ages. Our professional service portfolio includes the full range of RICS home surveys, meaning we can advise you of major faults and building defects before you proceed with the purchase. In addition, we can provide ongoing monitoring services for newly detected cracks and other situations where the presence of structural movement in a building is suspected and must be confirmed (or ruled out).

What is subsidence?

In basic terms, subsidence happens when the ground on which the building stands begins to sink. Unstable foundations can cause the house to become askew and strained by the movement below. Structural damage can occur that calls into question the integrity of the building. While, ultimately, this could lead to the collapse of the structure, in practice subsidence can often be dealt with quite easily, particularly if the signs are spotted early on.

What causes it?

There are many reasons why subsidence may occur. Moisture plays a critical part and this can manifest in various ways. If the house is built on clay soil, for instance, the ground is likely to swell and shrink with rising and falling moisture content through the seasons. This can cause natural shifts which may well affect the building on top. Soils such as gravel and sand, on the other hand, won’t shrink or swell but could be at risk of being washed away as a result of extended periods of wet weather or, more likely, damaged underground drainage pipes.

The water content of the soil is also affected by trees, shrubs and bushes growing near the building. Plants draw up the moisture they need through their roots, leaving the soil drier and therefore more susceptible to shrinkage. The effect is obviously compounded on clay soils. Some trees such as willow, poplar, oak and elm are particularly thirsty and should always be situated at a safe distance from the house, and preferably not planted at all in a regular-sized garden.

Other causes of subsidence can include seemingly innocuous things like persistent traffic-induced vibrations and building work close to the house, long-term leaking underground pipes, and a history of mining in the area.

How to spot the signs

If there is subsidence, detecting it early will make remedial work much easier and potentially a lot cheaper. Tell-tale signs include cracks in the wall that appear suddenly and are:

• Generally larger than harmless plaster cracks (>3mm)
• Typically diagonal in nature, often being wider at the top than at the bottom
• Often situated around windows and doors, or where an extension joins the main building
• Visible on the inside and outside of the property

Drops in flooring is another potential indicator of subsidence. Uneven skirting boards, with gaps underneath, and uneven surfaces elsewhere, may all point to structural movement having occurred.

At Able Surveyors, our team have a keen trained eye and will be able to tell the difference between cracks that are perfectly normal and nothing to worry about, and signs of subsidence, which will be clearly documented in our survey report.

Should you buy a house with a history of subsidence?

Of course, the $64,000 question is whether you should run a mile from any house that has suffered from structural movement at some point, or whether it is OK to proceed with the purchase, and at what price. Our professional advice is to obtain all the salient facts before making your decision. To that end, we recommend that you:

• Have a full RICS Building Survey carried out to establish the nature and severity of any structural problems. The report will also contain our recommendations for remedial action along with cost estimates.
• Discuss the property with your mortgage broker or lender as a matter of priority. Lending criteria vary between mortgage companies, and additional checks will be necessary, while some may refuse to provide finance on subsidence affected properties altogether.
• Obtain proof from the seller that any historic subsidence issue has been fixed, including details of what was done (monitoring, underpinning etc) and when it was completed.
• Research home insurance options for properties with a history of subsidence. Standard home insurance cover may not be available, or only at exorbitant premiums, but there are many niche insurance providers who may be suitable.

What price should you pay?

While there is little doubt that a house afflicted by subsidence, past or present, will be worth less than a comparable property where structural movement is not an issue, it is difficult to put a clear figure on this. Every property is different, and it is up to the seller and the buyer to negotiate a mutually agreeable purchase price.

This is where a RICS Building Survey can be hugely helpful to the buyer. Armed with the detailed report findings regarding the structural condition of the building, you are now in the best possible situation to make an informed decision, whether you choose to proceed with the transaction as planned, ask the seller to remedy the problem, renegotiate the price or walk away from the sale.

If you would like to discuss your next property purchase with our expert team, or get an instant survey quote, please contact the Able Surveyors team.

Property surveying is a complex technical discipline with information that is often hard to comprehend unless you are a Chartered Surveyor yourself. Little wonder, then, that there are many myths and misconceptions surrounding building surveys circulating among homebuyers who have no experience in the field. Let’s take a look at four of the most common wrongly-made assumptions and replace fiction with facts.

1 – You don’t need a property survey if you have a mortgage valuation

One of the most common falsehoods is the belief that a mortgage valuation is enough. Please be warned that this is not the case. A property valuation carried out on behalf of your lender is for their benefit only; its sole purpose is to ensure the property is worth the loan you are applying for. Often little more than a tick-box exercise performed during a brief site visit, it gives next to no information about the condition of the property, and you may not even get to see a copy. An independent property survey such as the level 2 RICS HomeBuyer Report or RICS Building Survey, on the other hand, is an impartial inspection of the property to assess its condition, carried out on your behalf to protect your investment.

2 – A survey is nice to have but the money could be better spent elsewhere

Unfortunately, many homebuyers still believe that an independent property survey is a needless expense. But think of it this way: you wouldn’t buy a car without giving it a thorough once-over first, so surely the same principle applies to what could well be the biggest financial commitment you will ever make? A survey may cost a few hundred pounds but the findings may include hidden and unexpected defects that may cost thousands to rectify later on. It could even flag up serious issues that may make you change your mind about the purchase, or the price. Rather than a needless expense, think of a property survey as due diligence to ensure you’re making a sound investment.

3 – Survey reports are deliberately vague to cover the surveyor’s back

Another cynical misconception is that survey findings are purposefully reported in an unclear fashion so as to protect the surveyor from any legal action if problems are later uncovered that should have been flagged up in the survey. With a reputable and experienced firm of RICS-accredited Chartered Surveyors such as Able Surveyors, that won’t be the case. We meticulously inspect every property and deliver a comprehensive and detailed report of the condition of the property. Our aim is to provide you with full feedback, including implications of any defects found, so that you have all the information you need to make an intelligent purchase decision.

4 – I won’t be able to understand the survey report, so there’s no point having one

At Able Surveyors, we offer the full range of RICS home surveys – basic RICS Level 1 Condition Report, mid-range RICS HomeBuyer Report and in-depth RICS Building Survey – as well as a range of specialist investigations. Our reporting follows a standardised structure and clear, jargon-free language to enable everyone to understand the findings and their implications. We will go the extra mile to ensure that you fully understand all the information presented, offering opportunities to discuss the survey findings with our surveyors and obtain plenty of professional advice and guidance from our competent, friendly team.

If you are thinking of buying a property, don’t make the mistake of skipping the survey – you could regret the decision in years to come. An independent home survey is the best way to provide you with the peace of mind that your investment is sound. At Able Surveyors, we can advise on the best choice of property survey for your needs, answer any queries you may have and provide an instant quote. Please feel free to get in touch.