Waiting for reform could possibly end up costing you more.
With reform to the leasehold system on the way, you may be wondering whether it is worth postponing your lease extension or freehold purchase to secure a better deal. The honest answer is: it all depends on your circumstances.
Sajid Javid, the then Housing and Communities Secretary, announced late last year that the Government will introduce new measures concerning the leasehold system, aiming to tackle “unfair and abusive practices.”
The measures include: limiting the creation of leasehold estates on new-build houses, ensuring nil ground rents on new long leases, and amending the lease extension and freehold purchase process so that it is “much easier, faster and cheaper.”
If the Government are introducing measures to save you money, surely it is better to wait to extend your lease or purchase your freehold? Well, not exactly.
The proposed reforms for existing leases may take some months, if not years, to come to fruition. In the meantime, your lease will be getting shorter, depreciating in value and the cost of extending will continue to rise.
According to specialist leasehold valuer Nick Plotnek, “If you need to draw a line and move on, the best thing to do is to sort out your extension as soon as you can. Leaving it can result in the issue becoming more expensive to deal with.”
Why would it be more expensive to wait?
It can become more expensive to wait if the length of the lease falls below or approaches 80 years. The 80 year rule is the accepted convention that considerable depreciation begins when a lease has less than 80 years left.
So, if your property is approaching or has fallen below the 80-year mark, it may not be the best idea to postpone your lease extension or freehold purchase any longer. It is possible that postponing the process will actually erode any savings brought about by the reform. This is especially true as the precise details of the reform are still unclear.
“Nobody has any idea at the moment what the reform will be for existing leases, so it’s better to deal with the issue as it stands now.”
However, if your lease is well above the 80-year mark, then the best advice “is to wait and see what the Government has in mind.” Leaseholders around the 90-year mark can afford to wait until these plans are published without significant depreciation to their leases—provided they are not burdened by onerous terms.
If you are unsure whether you should wait to extend your lease or purchase your freehold, contact a specialist surveyor. Nick Plotnek Associates can offer preliminary advice, free of charge, regarding your lease extension or freehold purchase.
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