Reply With QuoteCan you extend the lease? How cheap is it? What if you can't sell it when you want to?
Finance on short leases is difficult, which may not affect you, but may reduce the chances of finding a buyer.
M
Sent from my ASUS_X00PD using Tapatalk
Just floating the idea
My brothers trying to bring me in on buying a flat with 60 years left on the lease
It’s a purpose built flat requiring not a great deal of work - something we’ve wanted to do for a while
We would be looking to rent it out
Can anyone give any experience or advice
Can you extend the lease? How cheap is it? What if you can't sell it when you want to?
Finance on short leases is difficult, which may not affect you, but may reduce the chances of finding a buyer.
M
Sent from my ASUS_X00PD using Tapatalk
Breitling Cosmonaute 809 - What's not to like?
Well the first thing is you'll struggle to get a mortgage on it if you need one. The second is that if you manage to buy it (with your own money or via a sympathetic lender) it will be very difficult to sell again without extending the lease.
The good news is you have the right to extend the lease. The bad news is it costs money (the amount will depend on a number of factors but will run into many thousands) and some lease owners are reluctant to fulfil their obligation and arrange an extension. I'm dealing with one at the moment where the lease owner has proved to be totally uncooperative and I've had to appoint specialist lawyers to pin him down. I'm 7 months into the process now and it's still not done.
It’s around £60k and would be a cash purchase
Snap! I'm doing the same thing but with a flat with 56 years remaining, originally we were told it was 83 years and based our offer on this leasehold length and the condition which is poor, full refurbishment.
Solicitors have been a nightmare but thats another story, they found out it has 56 remaining so that was a bomb shell, moving forward the management company will not increase the leasehold beyond 82 years as the free holder wants them all in the same block to expire on the same date which in 2103, to increase it to 82 years or plus 26 years they want £15k.
I was expecting £10k+ as I knew the marriage value tax would be heavy but £15k was a surprise, if you don't know marriage value is a percentage of the difference the lease extension will make to your properties value, if its worth £150k with 60 years remaining and £200k with 99 years then the freeholder wants a slice of that profit pie, just like dodgy Rolex AD's wanting a slice of grey market Daytona!!
New laws will be coming into force over the next couple of years hopefully banning marriage value and high ground rents with new leaseholds up to 990 years, twice I have linked this tonight! - https://www.gov.uk/government/news/g...uy-their-homes
We're still in discussion and not sure where to go from here, luckily we are cash buyers but don't want to get stuck and have our money tied up.
Also remember that I dont think you can apply for a lease extension until you have owned the property for 2 years, to get round that you can get the current owner to start the lease extension process and you can finish it off - good luck!
Last edited by murkeywaters; 18th July 2021 at 23:31.
Walk away Paul. Leases are a nightmare that keep getting more scary. Move onto something else.
Leaseholds are fine as long as you educate yourself on the plus and minus's of your situation, top that up by having a professional look over the details and you should be good.Originally Posted by TaketheCannoli
The biggest problem with many leaseholds is untraceable owners, while that can be worked around I wouldn't advise anyone buy a property in this situation.
Short leaseholds can be good buys but you need the freeholder to be willing to communicate about extending.
Why would you? Buying into hassle.
Started out with nothing. Still have most of it left.
One point that doesn’t seem to have been covered here is the fact you have to own the property for 2 years before you can apply for the lease extension.
The other option is that the seller applies for the lease extension and assigns the benefit to the buyer. Assuming they’re willing to that of course.
Been going through all this crap to try and sell by mums retirement flat. Never in my lifetime will I buy a retirement property, but that’s another conversation.
Correct.
OP, If you have a freeholder who you have communicate with and is willing to extend...you have options. Search land registry for the block (assuming it is a block) and try to find out if others have been extended and for how much (possible for a small fee).
When we did this, I had a lease extension offer in writing from the freeholder and had started legal work with their lawyers on the extension, before we exchanged on the leasehold itself.
Having said that, it can be a full-on headache of a process and can take years to get it done if things go wrong, like they did in our case. This was due to COVID and other factors out of anyone's control! (Long stroy)
Is the property discounted due to the relatively short lease?
Agree with others ref the freeholder, if hes not easy to get hold of, id probably step away.
Will have to be as it'll more than likely be "cash buyers only". Unlikely to find a lender for that and if you do their mortgage rates won't be competitive to say the least.
Usually getting the current owner to start to process and then assigning you the right after exchange/completion is your best bet but not always possible. IIRC the process is called serving a section 42 notice to the freeholder.
As an idea of what extending the lease can do for value. I have a flat in London with 900+ years left on the lease but with ground rent doubling every 10 years. Currently £400 P/A and first doubling is next year. A £20k lease extension adds 90 years to the lease but crucially gets rid of any ground rent. This will add around £120k to the value of the flat but in reality make it sellable to anyone as very few mortgage lenders will lend on a flat with doubling ground rent clause and so it is cash buyers only and they will just haggle the price down.
Sent from my SM-G950F using Tapatalk
Ryan in your situation I'm pretty sure you have to first buy the freehold for the entire building. It isn't as simple as "I'll buy my bit for £20k please".
You need at least 50% of the building to want to buy it (and have the means). Many people end up paying double (for the 50% who can't/won't buy it) and then rely on getting paid for a lease ext or buyout later.
Your situation is quite unique however so I'd imagine everyone in the block wants this, just a question of 50% raising 100% of the cost + fees.
I hope you've done this Ryan?
Not yet as there is no rush as I don't plan to sell soon. The freeholder has offered to convert the doubling ground rent to RPI increase so I'll do that first. Maybe the price of doing the extension will come down in future.
Sent from my SM-G950F using Tapatalk
I'd be tempted to do it now Ryan as it's highly possible that the £20k will increase. When we bought our current home we intended staying for 25 - 30 years but bought the freehold anyway for £3800. Now thirteen years later they're circa £8000.
This makes sense. I was confused at how the individual leaseholders thing was going to work. The issue will be how many of the individual leaseholders can afford to chip in and buy the freehold.
Sorry Ryan, might have got the wrong end of the stick from an earlier thread. I thought you were talking about buying the freehold and converting to share of freehold to get around the ground rent.
We don't have leaseholds here in Scotland and I know there was talk of them being done away with in England & Wales. Is that still happening?
Basically the value is set at a fair compensation to the Freeholder of loss of Ground rent. Usually 20 x Ground Rent so at £400 per annum should be around £8k. However the £20k comes from supposed incremental loss of Ground Rent due to doubling Ground Rent clauses increasing Ground Rent in future. The issue with that is the Government is on the cusp of declaring these illegal so a wait may entail a 20x £400 fee plus legal bills, so probably £10k all in.
To be honest I suspect once the conveyancers have been sued it will even out as they for sure will be held liable
I think I’ve given my brother a reality check - I’ve also looked and it appears it’s sold twice in the last 8 months - alarm bells
Thanks all
As I'm in a similar situation as you, after researching and exhausting every route myself and business partner have decided we will probably now pull out, just had a chat with a knowledgable mortgage advisor, essentially there is money to be made in short leaseholds especially when renting but its a gamble for us regarding having our capital tied up, our business plan was to buy - refurbish - sell so I think we need to go back to that train of thought.
Hope it works out for you but tread carefully and do your homework..
Posting Permissions
