Lease length leaves leaseholders low

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Development: Dilwyn Court
Location: High Wycombe
Number of properties: 1

Dilwyn Court is a development of 24 flats based in high Wycombe.

The problem

Common Ground began managing Dilwyn Court, High Wycombe in 2011. Whilst the site had been well managed by an agent who withdrew from the block/estate management market, Common Ground quickly identified that the unexpired term on the leases was less than 75 years.

The solution

The most important trigger point for a diminishing lease is at 80 years. This is because the formula for calculating how much you must pay for a lease extension, is considerably more favourable towards the freeholder when there is less than 80 years left to run. Where there is less than 80 years left, in addition to compensating the freeholder for the delay in getting the property back, the home owner also has to pay the freeholder half of the increase in the lease’s value that results from the lease extension. This is not the case for leases of more than 80 years. This uplift in the lease’s value caused by the extension is called the “marriage value”.

Leases of less than 70 years face the additional problem that they become increasingly difficult to market for sale as many lenders will not grant mortgages. This has the knock on effect of diminishing the re-sale value of the property.

Common Ground raised this issue at each of the three previous annual meetings and in 2015, co-ordinated the purchase of the Freehold by the leaseholders.

As a managing agent, Common Ground seeks to anticipate and rectify problems before they become a significant issue. By purchasing the freehold, the leaseholders have protected the value of their properties as well as gaining greater control of their estate.

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