Leasehold flat

sophiesofa

Hello,

I'm thinking of putting in an offer for a flat im SE london for about 240k - eek! It's what we want but it has a lease of 86 years. Someone said to me that was too low but he didn't really know why. What's everyones opinion on a sensible minimum lease to buy if we're planning on living there for a few years?

:rolleyes:

Richard_Webster

Once the lease length goes under 80 years the amount payable for a lease extension increases to take into account "marriage value" which very roughly is a figure to reflect the reduced vlaue of a flat with a short lease. In an ideal world people want to buy before the lease gets below 82 years because they need to have owned the flat for 2 years to qualify for a statutory lease extension - 90 year addition to the lease length and reduction of ground rent to nil - but this is not free- you have to pay the rate clacualted in accordance with a formula.

You can get a rough idea of the likely cost of an extension by going to: http://www.lease-advice.org/calcframe.htm

Obviously the market value of the property at the time will have an effect on the calculation, so it pays to extend while values are low! However, as the lease gets shorter the proportion that a lease extension cost bears to the market value will increase, and the increase gets faster under 80 years.

daveb975

86 years is fine, but as Richard says, you will need to extend it before it gets down to 80 to avoid the increased costs. You should make sure that this is factored into the price you pay.

The cost of the lease extension varies massively dependent on price, area, freeholder and whether you go by the formal LVT route (as described by Richard) or make an agreement directly with the freeholder.

I would budget around £10k for doing this, so may be worth looking for somewhere else if this one is not £10k cheaper than one with 90 years or more remaining on the lease.

ad44downey

daveb975 wrote: »

I would budget around £10k for doing this, so may be worth looking for somewhere else if this one is not £10k cheaper than one with 90 years or more remaining on the lease.

in London you can pay more like £20K or £25k for this!

mlz1413

The main reason for a 'long' lease being preferable / necessary is that mortgage lenders want the lease to be 25 years longer than the mortgage - ie 50 years is the very minimum to get a mortgage on a property.

I went to buy a flat and the lease was 49 years so the mortgage was not approved, I agreed to continue if the vendors paid for a renewal, which was £6000 + fees of at least £1000 + vat and that only bought another 25 years.

Also ask what the managment company are like and what the sinking fund available is - this maybe called other names but it is the fund held towards repair costs. Basically a good management company will have a fund large enough to cover repairs without grossly increasing the charges, remember things like lifts and grounds need constant upkeep so a good look at the condition of these will give an insight into how good the management of the building is. But if possible ask to see the last years invoices.

daveb975

ad44downey wrote: »

in London you can pay more like £20K or £25k for this!

You can, but I would hope it would be less on a flat worth £240k with over 80 years left on the lease.

One example that I looked at recently valued a 90 year extension on a flat of a similar value with 78 years on the lease at £18k. The surveyors view that this woul have been more like £6-7k if the lease remaining was 80 years rather than 78. It makes a massive difference.

daveb975

mlz1413 wrote: »

Also ask what the managment company are like and what the sinking fund available is - this maybe called other names but it is the fund held towards repair costs. Basically a good management company will have a fund large enough to cover repairs without grossly increasing the charges, remember things like lifts and grounds need constant upkeep so a good look at the condition of these will give an insight into how good the management of the building is. But if possible ask to see the last years invoices.

Excellent advice. A lot of people concentrate on lease length/costs, but there is little advantage in having a 999 year lease with an inefficient freeholder who is going to charge a high maintenance fee and still ask for lump sums from the leaseholder when large repairs become necessary.

sophiesofa

Hello, sorry I couldn't find my thread again (until now(i'm not usually such an idiot)). Some very sound advice from all. It does make it seem slightly more hopeful than what i'd thought. Shall have a very long think about making an offer.

Thanks again