Should Flat Owners Extend Their Lease

According to recent research, flat owners currently living in apartments built in the 1960’s, 70’s or 80’s could be at risk of having to pay higher fees to extend their leases if they do not act soon.

Due to the delicate nature of these properties lifespans, property experts are advising flat owners in England or Wales to either extend or buy their leases otherwise they could soon be faced with leasehold enfranchisement and leasehold extension.

By definition a ‘leasehold extension’ involves the extending of a property lease by paying either the landlord or the freeholder a sum of money (otherwise known as compensation).


However in order to extend your lease, the owners of the flat must have owned it for at least 2 years and must be prepared to lower the rent of the property back to its ground rent to prove the property is still a leasehold.

A leasehold enfranchisement on the other hand involves buying the freehold from the landlord and transforming the leasehold property into a freehold property. To achieve this, you must own the property and the land the property is built on outright.

The main problem with this route though is that properties built in the last 40 years have now only got unexpired terms of only 50-80 years left. For this reason they will be difficult to sell/mortgage because many mortgage lenders are not keen on lending on flats which have got short leases (as they do not provide much security).

This scenario is even worse for property owners who have got an unexpired term of above 80 years. Not only will the premium to extend their flat leases be higher but by law they must pay a compensation of 50% of what the property will be worth once the lease has been extended (Marriage value).

For this reason, many property advisors are recommending that flat owners act sooner rather than later to avoid paying larger sums on their marriage value.

More than a million people aged over 50 are believed to be relying on increasing property values to help fund their retirement. Yet since the onset of the recession during autumn 2007 an estimated £27,250 is believed to have been wiped off the price of UK property values.

Even following the last 7 months which has witnessed property price increases of £15,000, this overall property loss has still severely dented pre-retirees plans to use equity release to boost their retirement.


According to popular insurance company Liverpool Victoria, more than 12% of over 50s believed so much in the capital growth of their properties that they have chosen to save less independently.

And as a consequence, many now face a reduced standard of living when they hit retirement..

Yet despite these property price falls, confidence still remains in the long term value of their properties.

Through the use of equity release - where money is taken from the value of their properties – many over 50’s plan to fund their retirement by taking money out of their properties.

However, consumer group Which? feels this could be a big mistake and should only be used as a last resort.

Expensive, inflexible, and more often than not designed to leave people with little equity to play with; property experts recommend downsizing to a smaller, cheaper property instead. Not only is downsizing easier but pre-retirees can instantly benefit from these profits.

Original Article

More About the Author

Fraser Stirling, Property Mentor Delegate

No matter what the media wants you to believe, property is still the only investment route where you can benefit from an asset that will NEVER go into zero value. Even when I was university I admired properties ability to withstand the economic elements and stay strong, even when other investment forms faltered or failed. X years on, I am now the proud owner of multiple property investments - one of which earns a passive income of £4,680 and my property portfolio is still expanding. Read more