You should consider doing this if the lease is ‘short’, or approaching 80 years in length. Once the lease is under 80 years it will cost more to extend because a factor known as ‘marriage value’ will be added in the calculation.
Properties can be difficult to sell or re-mortgage where the leases are under 75 years and lenders normally like to see 50 years plus the mortgage term (typically 75 years). In central London different considerations will apply where leases were originally shorter and capital values are higher. Nonetheless properties with extremely short leases will not be mortgagable.
If only cash buyers can buy a property it will reduce its open market value. You should accordingly take steps to protect the value of the investment in your property before the costs become significant. An alternative view is to see the asset as a wasting asset, producing an income that is rented out and to let the lease diminish to 0 years. If this is done, then you may face a claim for terminal dilapidations (damages for wants of repair etc in the premises). In such a case you should consider taking professional advice.
- More information about Extending Your Lease.