When you extend the length of the lease of your flat you have to pay your freeholder a fee – the premium.
Leaseholders with fewer than 80 years remaining are hit with an additional charge. This is because when you extend your lease the value of your property goes up. If your lease drops below 80 years you have to give half of this increase in value to your freeholder up front!
What a difference a day makes
This means that the difference between extending a lease with 80 years, and 79 years and 364 days, will cost you thousands of pounds. For higher value flats it can be tens of thousands.
Because of the increased stakes, the negotiation with the freeholder is often more hotly contested. This makes the process longer, less certain and less pleasant.
It is well worth making sure you extend your lease well before you get caught in the 80-year lease trap.
Selling your flat
Getting close to 80 years will also have an impact if you’re hoping to sell your property.
The prospect of having to extend the lease in the future will make it less attractive to any prospective buyer.
Well laid plans
Getting prepared for a lease extension (and getting the money together!) can take a while, so we’d recommend doing it well in advance of the 80 year mark.
It’s always possible to extend a much shorter lease, but if you want to save yourself a chunk of cash, we would recommend starting the process with no fewer than 85 years to go.