If you own a lease, the term decreases over time. As your lease term gets shorter it can make your property harder to sell, you may find it more difficult to remortgage and it can decrease the resale value of your property. Once a lease has 80 years or less, many mortgage companies will not lend against them and we have noticed an increase in lenders requiring a minimum unexpired term of 85 years or more. Shared owners do not have a statutory right to a lease extension (whereas Leaseholders do).
However, LiveWest offer lease extensions on a voluntary basis to both shared owners and leaseholders. The voluntary lease extension process mirrors the statutory process but is usually less expensive and there is no administration fee or deposit payable.
As long as LiveWest are the freeholder, you can extend your lease by an additional 90 years. There is a premium payable to us for this. This premium goes up significantly for leases with a term of 80 years or less (due to ‘marriage value’) so it is worth considering whether you are able to extend your lease before this.
If LiveWest are not the freeholder, you can still extend your lease, but the extended term cannot exceed the term of the relevant headlease.
What is Marriage Value?
Marriage value is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the property. The value that is foregone by LiveWest on a lease extension is linked to the ability to sell a new lease (or for a house to sell the freehold) at the end of the lease term.
Are diminishing lease terms a concern?
A diminishing or decreasing lease can mean:
- Making your property harder to sell.
- You may find it more difficult to remortgage.
- It can decrease the resale value of your property.
However, most shared owners have the ability to staircase to 100% and purchase the freehold (if they own a house) and the lease term is not an issue unless you want to sell or remortgage. We want shared owners and Leaseholders to be aware that currently, leases do cost more to extend if the remaining term is 80 years or less.
The Leasehold & Freehold Reform Act (LFRA) 2024
In May 2024, the Leasehold and Freehold Reform Act 2024 (LFRA) received Royal Assent and aims to substantially improve the rights of residential leaseholders. Such amendments include:
- Increasing the standard lease extension term to 990 years for houses and flats (up from 50 years in houses and 90 years in flats).
- Removing the bar preventing leaseholders from taking over the management of a site or buying their freehold if more than 25% of the floor space is non-residential; the limit has now been increased to 50% to enable more leaseholders to access the Right to Manage or the right to a collective enfranchisement (purchasing the freehold).
- Removing the requirement for a leaseholder to have owned their house or flat for two years before they can extend their lease or buy their freehold.
- Amendments to parts of the Landlord & Tenant Act 1985 regarding service charges and the requirements for greater transparency.
- The LFRA 2024 also seeks to regulate estate management charges to provide freeholders with similar protections to those enjoyed by residential leaseholders.
It is important to note that although the Act has received Royal Assent, these provisions are not yet in force. Until secondary legislation makes it clearer, it is not yet known how lease extensions will be valued or whether it will be cheaper for all leaseholders to extend their lease in every circumstance or just those with terms under the existing marriage value threshold (80 years).
We recommend that if you are considering extending your lease prior to such changes coming into force, that you seek independent legal advice. LiveWest cannot give advice about when it may be best to extend your lease or whether it will be beneficial to wait. Until such provisions are in force, LiveWest continue to offer a voluntary lease extensions process for shared owners which mirrors the existing statutory route (governed by the Leasehold Reform, Housing and Urban Development Act 1993).
Find out more
If you’d like to find out more, please view our lease extension overview here. Please contact us if you have any queries or you’d like to find out more: homeowner@livewest.co.uk.
Please note we are not able to confirm the premium payable for a lease extension as this is dependent on a formal valuation. You can, however, get an idea of how much it could be by using the calculator on the LEASE website.
Summary of costs
Item | Statutory extension | Voluntary extension |
Premium | Subject to a valuation | Subject to a valuation |
LiveWest administration fee | £0 | £0 |
LiveWest solicitor fee | £1,500 to £2,000 | £1,500 to £2,000 |
LiveWest valuation fee | £400 to £600 | £400 to £600 |
Customer solicitor fee | Customer to arrange | Customer to arrange |
Customer valuation fee | Customer to arrange | Not applicable |
Following feedback from LiveWest’s Shared Ownership Virtual Panel (SOVP), we have waived our £300 administration fee.