Statutory v/s Informal Lease Extension – Benefits and Risks
Investing in a residential house is always considered to be safe and right. If you own a leasehold property, your home worth depends on the remaining number of leases. You should never extend your lease after 80 years. You can ask any chartered surveyor, who will advise you that you should avoid your lease term falling below 80 years. If you own a leasehold house, then after two years you’re eligible to extend your lease with a formal(Statutory) or in another way you can ask your freeholder to extend your lease at any time with an informal lease extension procedure.
Informal Lease Extension
The informal lease extension procedure may not be correct for each lease extension circumstances, but it turns on when the leaseholder needs some flexibility in extending their home lease. The informal lease extension will go way better than the formal one as it can provide you with a complete lease extension valuation report also. The informal lease extension begins by communicating with the freeholder and negotiating for the lease extension’s new term which includes the length of the lease, lease extension cost, and payable ground rent.
There are several benefits that you can get from informal lease extensions:
- Minimize the legal cost than the statutory cost. (no notice procedures)
- Quicker lease extension as no formal process is required to be followed.
- No criteria are needed.
You can have a mutual agreement with the less traditional format. Both sides can negotiate and decide to change the lease extension terms. You can get a premium lease extension cost calculated by the lease extension valuation calculator online conveniently. With these online calculators, you can obtain an estimated lease extension cost that should be used during your lease extension negotiation process. Although, this procedure is not possible for all of the leaseholders. The leaseholders who don’t have much time and money follow this procedure rather than choosing a statutory process and infusing themselves in logical negotiations for both parties. In this process, any party has the right to change the terms of lease extensions.
There are no rules, no regulations in this method hence,
- The freeholders can complete their process within any time scale.
- The landlord would ask to pay the valuation cost and legal fees right at the time of negotiation.
- No access would be granted to the leaseholders towards the leasehold valuation tribunal.
- The freeholder has more advantages towards lease terms.
Statutory lease extension
Leasehold Reform Housing and Urban Development Act 1993 controls the statutory lease extension. Using this process, leasehold owners have the right to extend the lease of their houses. The leasehold owners urge to follow the statutory lease extension only. To extend the lease on your flat, you need to own the property for a minimum of 2 years. Are you looking to buy or sell your house or flat, with protected +90 years and no additional ground rent? Then this process is a must.
The formal lease extension has below the list of advantages:
- You can get a 90-year lease extension on your current lease terminology.
- The payable ground rent to the current lease term will revert to zero. The biggest issue of ground rent rising will be solved by selecting the statutory lease extension.
- The lease valuation date is frozen which means in the formal path, the premium value will no longer increase as the term will decrease.
- If you are on the formal path, you would be permitted protection when any dispute occurs. You have the right to take your case to the leasehold valuation tribunals(LVTs).
If you have owned the flat or house for a minimum of 2 years, then we recommend you to go with the formal(statutory) lease extension route. Get guidance from a professional leasehold valuation expert and carry out a lease valuation report. Before choosing one of the paths, you should be firm and settled with the lease terms. You should know that the legal solution will be more beneficial and efficient than the easier one. You can choose the easier one(informal procedure) if you have not owned the house for a minimum of 2 years. To get the best advice and guidance on lease extension valuation and lease terminology, you can schedule a 10-minute free consultation with our expert chartered surveyors at Leasehold Valuations.