It is an astonishing fact for some people that around 20 percent residential properties in the country are leasehold. It means around 4 million properties fall under the category of diminishing asset.
If we look at the statistics of London, then the figure is further large. Almost one-third of the properties are leasehold.
Yes, the government very well knows it. And it is the reason; leasehold reform is an important line item on the agenda.
However, till the time these reforms come into reality, it is the responsibility of homeowners to have a close eye on the lease extension.
If the lease runs down, then there could be a drop in the resale value of the leasehold property.
A report says that there are almost half a million homes in the London where the duration of the lease remaining is below 80 years.
Why is lease extension important?
When the lease term falls below 80 years, it becomes difficult for the leaseholder to resale the property or remortgage.
Mortgage lenders don’t consider the application because of the increased risk of lending.
Those leaseholders who meet the eligibility criteria are required to go for a lease extension.
Since it is the point from where the renewal cost shoots up; leaseholders must calculate the remaining length of the lease. They should gather information about how much cost is expected to extend.
Also, the value required to extend the leasehold needs to be calculated accurately.
Many people believe that there is no harm in using online calculators offered by many service providers. However, experts suggest that one should hire a reputed chartered valuer because there are several benefits.
Advantages of hiring a chartered valuer
When it is the matter of extending the lease, you must calculate it correctly. Several things make online calculator an inappropriate choice.
• When you conduct price negotiations with the freeholder, you may feel it a little awkward to refer to an online calculator. The calculation might be missing some important inputs. A chartered valuer will keep everything in mind.
• Online calculators don’t know the nuances regarding location. At times, they aren’t adept at tacking legislative changes into account. There could be an ambiguity in determining a location prime central location or not.
• There could be an error in calculating the capital value by the leaseholder. It is more significant when the improvements made by the leaseholder is documented. Hence, it is always preferred to hire a chartered valuer.
• In a premium offer based on online calculation, there will be a requirement of chartered valuer to finalize the negotiations. Hence, hire a good valuer beforehand.
• The lowest justifiable premium rates can be offered by experienced lease valuers only, not by online calculators.
A chartered valuer is an expert person who knows how to carry out negotiations with the freeholder. He has evidence of other ongoing claims and the cases of lease extension premium settlement.
In brief, don’t get lured with online calculators. Proceed in a structured manner by hiring expert chartered valuers.