While the content of such leases can be a prob-lem for some providers, their length is often the main impediment.
Product providers have differing criteria for accepting leasehold properties. Usually they re-late to either the remaining term of the leases or a combination of this and the clients’ age.
Sadly we can’t turn back time but we can off-er a helping hand when it comes to lease terms that might render clients ineligible for equity release products.
The Leasehold Reform and Urban Development Act 1993 is worthy of our attention. This piece of legislation has proved to be a boon for many consumers who don’t qualify for loans.
The act is extensive, but of particular importance to both mainstream and equity re-lease advisers is its element that allows leases to be extended and freeholds bought.
For the act to apply, properties originally must have had a lease period of at least 21 years, irrespective of the remaining term.
They must also have been used for residential purposes only. If the property in question is a flat, no more than 10% of the surrounding building can have been used for commercial purposes for the act to apply, thereby excluding most apartments above shops.
If properties qualify under the rules of the act, leaseholders must be allowed to extend their leases by up to 90 years.
This rule should make it possible to smooth the way for equity release schemes, although any extension to the leases will not come for free. So it would be wise for clients to consider having individual valuations carried out for the cost of the lease extensions.
There are many sources of information, one of which is www.leaseholdadvicecentre. co.uk.
This website provides a useful overview of the act and offers services for lease extensions and freehold purchases, plus an explanation of the processes involved.