If you’re reading this article you probably know that the government are planning to make changes which should make it cheaper to extend your lease. It’s difficult to tell when these changes will come in. Our money is on mid-2020 at the earliest.
But the difficult question is… should I wait for lease reform? Or press on and extend my lease now?
The answer will depend on the length of your lease, your ground rent and also your own situation. Which of the below describes your situation best?
My lease is currently between 80 and 83 years.
You should extend your lease now. If your lease drops below 80 years the cost of extending will increase significantly.
It’s not worth gambling the chance to save thousands of pounds today on the chance of a better deal in the future.
My lease is either below 80 years or between 83 and 90 years and I am planning on selling soon.
Selling a short-lease flat is tricky. Savvy buyers will make you a much lower offer than if your flat had a long lease. Even if you receive a reasonable offer, the buyer is likely pull out of the sale or ask for a big discount once they’ve been tipped-off by their solicitor.
It’s much better to sell with a long lease. You should aim to get the extension process started 18 months before you put your flat on the market.
My lease is below 80 years, but I am not planning on selling.
This is a tricky one. On one hand, a change in the law might make extending your lease cheaper. On the other hand, the longer you wait the more expensive it will get.
It’s a gamble!
My lease is above 83 years, and I am not planning on selling.
You can wait and see. Waiting a few years won’t increase the cost of extending dramatically.
If you’ve got fewer than 85 years remaining, make sure you keep an eye on things. You don’t want to risk it falling below 80.
My lease is above 83 years, but our ground rent is set to increase soon
One of the benefits of extending your lease is that it reduces your ground rent to zero.
If you want to reduce your ground rent – perhaps to make your flat more attractive to buyers – then it might be worth extending your lease now.
We’d specifically encourage you to consider this if your ground rent is linked to inflation (sometimes called RPI) and it is due to increase soon. In this case it can be much cheaper to extend before the ground rent is increased.
Do what’s right for you
Regardless of the details, you need to make a decision that is right for you and your financial situation.
For example, if the current cost of extending is too high for you, then you might have to wait and see if the changes will give you the break you need.
Equally, if you can afford to extend your lease now, but you might not be able to in the future (perhaps you’re retiring) then you might want to get on with it.