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LEASE ISSUES Property rights and ownership of land have essentially been the key foundation of London's style and differences especially when compared to many other world cities. The old and still powerful family estates retain much control on large areas of residential London, primarily the Grosvenor Estate (Duke of Westminster) who owns and controls much of Mayfair, Belgravia and Pimlico. The Cadogan Estate covers much of Knightsbridge and parts of Chelsea. The DeWalden, Portman and Portland Estates own what we know of as Marylebone. Even the Church of England is still a big player throughout Hyde Park Estate and Bayswater. As a result leases are of much more significance when purchasing a property in Central London, especially when using a mortgage. Why do leases exist? Originally if you go back far enough most of London was undeveloped farm land and country estates. As the great move west occurred after the Great Fire of London (1666) demand for housing outside the old and cramped City of London boomed as the wealthy wanted a change to cleaner air and larger homes in better surroundings. This led to the owners of the farms and country estates inviting builders to develop streets and suburbs on their land. The land owner would normally grant a lease of 99 years to the developer, thinking that the properties would not last much longer and that this is plenty of time to make their money back. However the idea proved so successful and the houses of such a good quality that they lasted until now and are still going strong. Thus lease extensions have had to become an important part in buying and selling homes. Are leases bad for buyers? Similar to a rental contract a lease allows you to occupy the property for a set time, however you do have a lot more rights than a AST tenant, and following recent government reforms you have the right on most leases to extend or even buy the freehold. How does it affect property prices? The shorter the lease on a property the greater its affect on the value. But everything is balanced. The key factor is the renewal cost to the owner/buyer. Prices for extending are fairly complicated but generally take the value before and estimated value after the extension, factor in some other costs and then calculate a negotiated settlement figure between the two values. Sounds complicated and it is, but there are many specialists in the legal and finance markets that know it inside out and will stop you from getting ripped off. The whole process is controlled by government legislation and you do have a right of appeal if you feel the prices are unfair. You will not pay more for the combined short lease property and extension than a long lease property of the same specification. What about leases and mortgage providers? Traditionally
the banks were very sceptical when lending on short lease properties and
many still only offer finance on properties with a lease over 65 - 70
years. However some banks have woken up to the potential of short lease
properties in Central London where everything no matter how short has a
value and demand. As a result some of the brokers we deal with can get
mortgages on leases of 8 years and above. Most areas of Central London are extending their leases so many of the current sales properties have leases in excess of 70 years or Freeholds. However in the old traditionally wealthy areas of London where money is not a major concern to many of the owners you will find many short leases. Belgravia, Mayfair and Knightsbridge still have a large selection of leases from 5 years to 25 years, alongside extended conventional terms. |
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Copyright Park Lane Estate
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