Risks To Diminishing Lease Terms
Potentially one and a half million leaseholders in England and Wales are facing an increased risk of their property plummeting in value, or even becoming unmortgageable, as a number of lenders have recently increased their minimum unexpired lease term requirements to 85 years.
In the last six months of 2015, 17 lenders – more than 12% of all mainstream lenders – amended their minimum lease term requirements upwards and ten lenders made a change from 70 to 85 years.
The lender’s requirements on the unexpired term of a lease offered as security are set out in part 2 of section 5.14.1 of the Council of Mortgage Lenders (CML) handbook; the changes to these requirements means that many leasehold owners with less than 85 years remaining may find it very difficult to sell on.
Whether acting for the Seller or Buyer, we aim to minimise these difficulties for our clients by bringing this issue to their attention in early course and incorporating it in our Report on Title, where we also set out the various options available to them to progress the transaction.
Our approach ensures that the client is able to make an informed decision before committing to the transaction and when they look to sell the property, they will either have an already extended lease, which was negotiated at the time of their purchase and is mortgageable for the purpose of section 5.14.1 of the CML Handbook or they will be fully aware of the pitfalls going forward.
If you have any queries about diminishing lease terms and what options are available to you please contact Elizabeth Cobb or Sidra Nawaz-Khan on 020 8891 6141 or e-mail firstname.lastname@example.org