Over the last year or two, we have seen lots of clients enquiring about lease extensions for their homes. What are they and why are they of value?
The majority of land in Gibraltar is held on a leasehold basis. This means that the head title to the land is Crown Property that is demised by His Excellency the Governor on behalf of His Majesty the King, to developers for a set amount of years, in order to build a project, typically 150 years, and the developers in turn grant sub-leases to buyers for a specific period of time, often 99 or 149 years, of a specific flat/car parking space/ store within a building project.
Most people do not think about the length of a lease until they are either buying or selling a property, but it should be something to think about and it is definitely relevant to banks if you are looking to mortgage a property. Why?
A longer lease term generally provides better security for a lender. It shows that the borrower has a secure and stable living situation for a specific period of time and in the event that the borrower were to default on the loan, makes it easier for the lender to sell on should it need to. A longer lease term usually increases the market value of the property (subject always to other factors such as location, condition of the property etc), making it more attractive to buyers and to lenders.
Generally, lenders in Gibraltar prefer a lease term on a residential property to have an unexpired residue of at least 50 years. This can obviously vary from bank to bank, as each lender has their own policies and different lending criteria.
A lease extension is a simple process that involves entering into a deed drafted/ approved by the superior lessor to the property, the effect of which deed is to grant the lessee with additional years in addition to the term of years already owned.
We have recently acted on lease extensions for owners at Montagu Gardens, Montagu Crescent, Harbour Views, Europlaza, Vineyards and other areas in Gibraltar.
Speak to a member of our Property team if you would like more information on this topic.
