A lease of land is a contractual agreement whereby the legal owner of the land agrees to another person using the property, for a specified period, in return for a payment.
The lessee must have exclusive possession of the land owned, to the exclusion of all others including the legal owner, although usually the legal owner retains a right under the terms of the lease to enter the property in certain circumstances, such as to repair the property.
Although some leases of residential property are very long, for example 999 years, many new leases are for much shorter periods, typically 125 years.
It is important when purchasing or selling a leasehold property, to give consideration to the length of the lease, but even where not buying or selling, in certain circumstances, you may wish to consider extending the term of the lease.
If the lease has 95 years or less remaining and you are planning to sell the property, it may be beneficial for you to extend the lease term as this may bring up the market value of the property.
If the lease has less than 80 years remaining and you wish to extend the term of the lease you would have to pay an additional “Marriage Fee” to the legal owner of the land, which amounts to 50% of the value added to the property as a result of the lease extension.Therefore you should consider extending the lease before the remaining term falls below 80 years.
If the term of your lease falls below 70 years, many lenders will not grant mortgages to a potential buyer and this may therefore make your property less marketable.A lease extension may help resolve that problem if you extend it before marketing the property.