A lease extension can bring various benefits to both landlords and tenants, depending on the specific circumstances.
Here are some of the key benefits:
A lease extension provides tenants with an extended period of secure tenure. It ensures that they can continue living or operating their business in the property without the fear of eviction once the initial lease expires.
Increased Property Value:
With a longer lease term, the property’s value tends to increase, which can be advantageous if tenants ever decide to sell or sublet the property in the future.
Enhanced Borrowing Capacity:
A property with a longer lease can boost a tenant’s borrowing capacity, making it easier for them to secure loans or mortgages against the property. Improved Marketability: A property with an extended lease becomes more attractive to potential buyers, tenants, or investors, as it eliminates the uncertainty of a short lease and offers a more stable investment.
A property with an extended lease becomes more attractive to potential buyers, tenants, or investors, as it eliminates the uncertainty of a short lease and offers a more stable investment.
Reduced Ground Rent:
In some cases, lease extensions may also result in a reduction of ground rent, making the property more affordable to maintain.
Increased Property Value:
By extending the lease, landlords can potentially increase the property’s market value, which can be advantageous if they plan to sell or refinance in the future.
Retained Rental Income:
Lease extensions enable landlords to continue receiving rental income from tenants for an extended period, reducing the risk of vacancies and ensuring consistent cash flow.
Attracting Long-Term Tenants:
A property with an extended lease is likely to attract long-term tenants who seek stability and security, reducing tenant turnover and associated vacancy costs.
Compliance with Lender Requirements:
Some lenders require a minimum lease term before providing financing to potential buyers. An extended lease can make the property more attractive to prospective buyers who require financing.
Avoiding Leasehold Reform:
In some jurisdictions, leaseholders may have the right to request a lease extension or enfranchisement, which could lead to additional costs and potential loss of the property. Offering a voluntary lease extension can help avoid such scenarios.
It’s essential to note that the benefits of a lease extension can vary depending on local laws, market conditions, and individual circumstances. Before proceeding with a lease extension, it’s advisable for both parties to seek legal and financial advice to fully understand their rights, obligations, and potential implications.