Extend Your Lease guide discussion

tomatoandcheese · 19 April 2017 at 11:57AM

Hi all, hoping for some advice. My husband and I are trying to buy a flat in London. There is very little in our preferred area in our price range and we've already been gazumped once. Now my husband has seen a flat that would be way out of our price range, except it has a short lease. It's pretty much our perfect property and is listed at offers over £290k. We have a max budget of £300k.

The estate agents say it has 72 years left on the lease (which is what the asking price is based on) but we've consulted the land registry and in fact there is only 65. Our lender will just about give us a mortgage on it at this length but wouldn't accept any shorter. Having looked at both online calculators and recent tribunal decisions for our area, a lease extension would cost in the region of 25-35k not including fees. We have £15k of that and the potential to borrow the extra from a relative (to be paid back plus inflation at 2% but no other interest). The likely value of the property after extension is somewhere between £320k and £360k

I think we'd be daft to go for this and should look outside our preferred area for something less 'perfect' but less likely to land us in debt (even if it is to a family member). My husband is really sold on the property though and wants to at least put a low offer in to see if we could then finance some of the extension via the mortgage. He's thinking £275-£280k. What do you think? Worth a punt with a low offer or avoid the headache and look elsewhere?

lorraines · 19 April 2017 at 1:12PM

eddddy wrote: »

There are two different routes to extending a lease
- Informal Extension
- Statutory Lease Extension

Based on this...

...it sounds like the agent is talking about an informal lease extension.

Whereas...

.... your freeholder (the local authority) is proposing a Statutory Lease extension.

It would be very difficult to offer a buyer 'extension on completion' with a statutory lease extension - because it's hard to estimate how long the process takes (I'd say 6 to 18 months).

Do you have the funds to pay for a lease extension before you sell? That might be the best option.

I don't have the funds or the time to go through the whole extension process. My estate agent was talking about 'getting the ball rolling' which I didn't really understand.

always_sunny · 19 April 2017 at 1:20PM

tomatoandcheese wrote: »

Hi all, hoping for some advice. My husband and I are trying to buy a flat in London. There is very little in our preferred area in our price range and we've already been gazumped once. Now my husband has seen a flat that would be way out of our price range, except it has a short lease. It's pretty much our perfect property and is listed at offers over £290k. We have a max budget of £300k.

The estate agents say it has 72 years left on the lease (which is what the asking price is based on) but we've consulted the land registry and in fact there is only 65. Our lender will just about give us a mortgage on it at this length but wouldn't accept any shorter. Having looked at both online calculators and recent tribunal decisions for our area, a lease extension would cost in the region of 25-35k not including fees. We have £15k of that and the potential to borrow the extra from a relative (to be paid back plus inflation at 2% but no other interest). The likely value of the property after extension is somewhere between £320k and £360k

I think we'd be daft to go for this and should look outside our preferred area for something less 'perfect' but less likely to land us in debt (even if it is to a family member). My husband is really sold on the property though and wants to at least put a low offer in to see if we could then finance some of the extension via the mortgage. He's thinking £275-£280k. What do you think? Worth a punt with a low offer or avoid the headache and look elsewhere?

It really depends on your finances, though keep in mind that if you were to buy the flat you would need to own it for 2 years before starting the statutory lease extension.
Will the current owner start the extension before you complete?
Informal Lease extension could start anytime but usually are best avoided.

tomatoandcheese · 19 April 2017 at 1:31PM

really depends on your finances, though keep in mind that if you were to buy the flat you would need to own it for 2 years before starting the statutory lease extension.
Will the current owner start the extension before you complete?
Informal Lease extension could start anytime but usually are best avoided.

The owner has already agreed to start the process so we wouldn't have to wait the two years, since costs would only go up.

Financially we will be better off once paying a mortgage etc since rent here is so high. It should give us roughly £300 extra a month which could go towards paying back a loan. But we also have our second child starting nursery in about 6 months and she'll overlap with the older one for 8 months when he starts school so there will be a short period of paying childcare for two which is pretty pricey!

always_sunny · 19 April 2017 at 1:52PM

lorraines wrote: »

Help please, lovely Forum folks.

I'm trying to sell my flat which has around 75 years lease left. My estate agents are trying to get me to sell subject to the lease extension being complete as part of the deal (and upon completion). My questions are?

As it's local authority, they are advising me that I need to get a private valuation and submit and S42 to start negotiations - does that sound usual?

Can it really take 6-12 months to complete?

Should I just sell without the lease hassle and priced appropriately?

Section 42 is what the leaseholder (you) need to issue the Freeholder to start the statutory lease extension. The whole process may take 6-12+ months but you can sell in the meantime and transfer the benefits to the buyer.

You will have upfront costs for valuations, etc and obviously the premium which you will need in cash. Informal extensions might be cheaper but usually tend to be more costly overall (i.e. cheaper premium and quicker, though high Ground Rent).

If you can't wait and/or don't have the funds to do the extension, you can sell with the current lease; most lenders require at least 40 years left on the lease after the mortgage is extinguished. 75 is not that short but you will need to price accordingly.
Long leases are obviously better but long leases with bad terms (usually informal) can be very bad too.

Linj59 · 22 April 2017 at 1:02PM

Would value any advice you can give on our situation:
We extended our lease to 99 years 2 years ago on a flat valued then at £160k at a cost of £22,000 plus costs of valuations and solicitors for both ourselves and the leaseholder (lease had only just under 54 years left). We did it informally via the person providing the valuation who did all the negotiations etc. Part of the final agreement was an increase in ground rent from £30 pa to £200pa and doubling every 25 years. Now we are in a slightly better financial situation due to a legacy, we are wondering it it makes financial sense to go for a formal lease extension which would also mean nil ground rent. Online lease calculator suggests this would cost around £10k including costs. Part of me wants to deprive leaseholder of ground rent but not sure if we are at risk of cutting off our noses to spite our faces. Thank you for any help you can offer.

always_sunny · 22 April 2017 at 5:53PM

Linj59 wrote: »

Would value any advice you can give on our situation:
We extended our lease to 99 years 2 years ago on a flat valued then at £160k at a cost of £22,000 plus costs of valuations and solicitors for both ourselves and the leaseholder (lease had only just under 54 years left). We did it informally via the person providing the valuation who did all the negotiations etc. Part of the final agreement was an increase in ground rent from £30 pa to £200pa and doubling every 25 years. Now we are in a slightly better financial situation due to a legacy, we are wondering it it makes financial sense to go for a formal lease extension which would also mean nil ground rent. Online lease calculator suggests this would cost around £10k including costs. Part of me wants to deprive leaseholder of ground rent but not sure if we are at risk of cutting off our noses to spite our faces. Thank you for any help you can offer.

If you can afford to I would, £10k to get GR to nil seems cheaper than paying overall £75k GR assuming there's no capping.

Hope you got the 99 years on top of the remaining 54!

hellenpaksoy · 14 June 2017 at 9:23PM

Hello Everyone

I need rather urgent help.

I have a shared ownership flat (50%) with Housing and I am currently extending my lease with Housing so that I can staircase to 100%. My mortgage requires a simultaneous lease extension.

Housing runs a “Voluntary Lease Extension” which we are following. My mortgage offers was ending on 8th June and Housing got back to me with a premium of £23k weeks before my mortgage was due ending. I wanted to make a counter offer but my solicitor suggested that we probably would not be able to complete in time if we counter-offered. He also suggested that I should ask neighbors to see if anyone extended their leases and only then we would have case for a counter offer. I tried but could not find anyone who extended their leases. So the next day I e-mailed my solicitor saying I accepted the premium. We were not able to complete and my mortgage offer expired and during this process I found out a neighbor extended for £11k and I made a counter offer which was rejected simply because we wrote a letter accepting the premium. We have not yet accepted the Draft Surrender and Lease. Is it now too late for counter offer? Is housing right in their claim or can I insist on my counter offer? How can I revert this?

10 May 2017 – Housing offered lease premium £23k
Through this week I tried to find a neighbor who extended their lease. (as per my solicitors suggested but I could not find anything)
17 May 2017 – my solicitor suggested we accept £23k or otherwise we would not be able to complete in time.
18 May 2017 – I accepted and my solicitor sent a letter saying we accepted the lease premium of £23k.

19 May 2017 – Housing solicitor sent Draft Surrender and Lease.

30 May 2017 – My solicitor wrote to Housing solicitor querying several points in terms of Draft Surrender and Lease. He asked whether other flats were offered the same lease. Housing solicitor said he can download and check himself.

06 June 2017 – My solicitor suggested we accept the Lease terms as they are so that we can complete soon. I said I wanted to see the other leases that they extended and ensure I am not given anything different than other people. I asked him if he could download them as Housing Solicitor suggested and He downloaded the leases from somewhere and sent them to me so that I can compare. I only them found out the £11k premium when all I wanted to check was the terms.

07 June 2017 ** I found out on the lease copy that a similar flat, same size, same lease terms extended their lease for £11k in 2015.
08 June – My mortgage offer expired.
09 June 2017 – I emailed my solicitor that I wanted to make a counter offer for £11k which is the amount neighbor paid. He wrote to Housing with the counter offer.
13 June 2017 – Housing Solicitor declined our offer saying “you have already accepted £23k premium as in your fax dated 18 May“
In a way I did not make a counter offer because I did not have the information of Neighbors at the time of offering. Later I found out this information and wanted to make a counter offer but they are rejecting simply because we said we accepted.
Draft surrender and lease is not accepted by us yet and I have not signed anything. My solicitor failed to find this information for me at the time I needed. He asked me to find it and I could not. I did not know solicitor could download these leases from an internet site. Do you think we could revert this mistake? I don’t want to pay twice the premium a similar flat paid. But will I have to pay it just because one letter saying we accepted it. Is it too late?

yellowtiger · 17 June 2017 at 11:04AM

Is it okay for me to use the same solicitor for my lease extension as the solicitor the management company uses? I thought the management company act for the freeholder. The management company have told me I can't contact the freeholder directly regarding extending my lease so I am confused.

eddddy · 17 June 2017 at 11:22AM

yellowtiger wrote: »

Is it okay for me to use the same solicitor for my lease extension as the solicitor the management company uses? I thought the management company act for the freeholder. The management company have told me I can't contact the freeholder directly regarding extending my lease so I am confused.

In general, you can't use the same solicitor as the other party.

Are you saying that the management company have told you to use the same solicitor?

I don't really follow what you are trying to say in the rest of your post.

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Extend Your Lease guide discussion

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