First Time Buyers Leasehold Query

Quiksilver_1

Hi guys I really need some advice on a flat I am looking to buy. Been though the usual procedures and my solicitor has sent me the relevant documents to sign.

Now I work in financial services and specialse in retirement planning and I like to read things and check things out before commiting to thing. The devil is in the detail.

Whilst flicking through the information sent the lease only has 76 years left on it and was a 99 year old lease granted in 1983. At this late stage I have only been informed of the length left and this along with the following statements conern me.

In a title information report prepared by my solicitor there is a sentence that states.

"Should you decide to sell the property in the future it may ne necessary for a lease extension to be obtained

There is also a letter from the vendors solicitors to the solicitors of the management agent which states that:

"I am not aware that any other lease have been extended or approaches made about this"

I did expain at the last AGM that there were now less than 80 years left on the leases and that it would progressively more difficult and costly for the lesses to either purchase the freehold of extend the leasehold"

In then goes on to say that they made it clear that individual lesses could and possibly should take their own advice on this matter.The freeholder is unlikely to wish to sell the freehold and is unsure to his attitude to extending the lease"

As the post arrive on Saturday I have not been able to contact the solicitor but they have not really advised me as far as I am concerned just presented me with the facts. I spoke to the Estate agent and there is attitude is that they have sold lots of flats in this development.

The research I have done suggests that is could potentially be costly to extend the lease and my plan is to only to get a foot on the ladder and move within 5 years. It seems this could be an issue when I come to sell and could potentially eat into any capital gain I make.

I would be interested to hear your views on this as I am starting to think it would be better to either get the current owner to extend the lease of for me to pull out and save an extra £5,000- £6,000 and look for a freehold place.

JustTakeAllMyMoney

I had same issue on my flat but its not as bad as it seems, in fact if you are going to stay there for a couple of years you could be quids in. In my place not enough residents wanted to buy the freehold so I increased the lease (76 yrs it was infact). On approaching the freeholder he wanted some silly figure, so I got my own lease increase valuation done, then just arranged a meeting at the 'Lease Holders Valution Tribunal', they agread my valutation was correct and reasonable and used the legally required calculations. Ive just selling the place and recon a couple of thousand spent returned me back about £15k.

EdInvestor

The freeholder is required to give you a lease extension after you have been in the flat for 2 years. It's often done when the flat changes hands, so suggest you get the vendor to do it now, as once itfalls below 80 years you can have problems with lenders.

https://www.lease-advice.org.uk explains the calculations and procedure.

natwill_3

Hi,

Like you I recently found a flat I liked, but the lease was 7o odd years left. The EA said not a problem, when I asked them to get a quote from the Freeholder it turned out it would cost £17,000 approx. I would also have to have paid for my own and the freeholders legal costs.

When a lease is under 80 years it becomes much more expensive to renew as the freeholder is entitled to something called the marriage value ( essentially I think the gain in MV of the flat with a longer lease).

You have to live in the flat for two years before you can apply to extend the lease, but the Freeholder has to agree to extending, its just the money he might want, similarly I think he has to sell the freehold if enough of the lessees want it, again though its the negociation over money.

In the end I decided not to go for the flat, and it is still on the market with no offers (EA keeps me informed). If you're planning on only keeping for a few years be carefull, short leases do put people off

Nat

Quiksilver_1

JustTakeAllMyMoney wrote:

I had same issue on my flat but its not as bad as it seems, in fact if you are going to stay there for a couple of years you could be quids in. In my place not enough residents wanted to buy the freehold so I increased the lease (76 yrs it was infact). On approaching the freeholder he wanted some silly figure, so I got my own lease increase valuation done, then just arranged a meeting at the 'Lease Holders Valution Tribunal', they agread my valutation was correct and reasonable and used the legally required calculations. Ive just selling the place and recon a couple of thousand spent returned me back about £15k.

That is an interesting view point as the documents I have state that the other residents do not have the means to buy the freehold. I have done some research on the tribunal and I guess it can work I just fear that the market might see huge growth in the next few years and the property in question is towards to top end of the market for the area so any growth could be swallowed in legal fees.

I think I will get a quote from the freeholder and see what happens but like Nat I am thinking of leaving it alone as it does not sit comfortably with me and I could pay out an extra a few thousand and buy a freehold house and not have these worries.

JustTakeAllMyMoney

The tribunals though in my case were very good, most freeholders try it on, I wouldnt take a figures he gives you as any real representation of what it will cost. It is a pain in the butt going through the legal process of increasing the lease, but in my case I recon Im about £10k up profit after all costs were paid

Marriage Value you pay when < 80 yrs on lease, you have to pay the freeholder 50% of what the property would increase in value if you increased the lease, hence the need for your own independent valuation.

Bun

We/I have now bought three flats which have had 99 yr leases starting in the mid 80's, ie the same sort of length you have now. We have encountered no prolems buying or selling. As long as you are not planning to stay in the property for more than a couple of years I don't see a problem. Mortgage co.s seemed to be fine if there were 60 yrs plus to run. If there are any doubts, either choose another property, or you could ask the existing owners to start the process if they have been there 2 years. I don't know if you have to continue or whether you can just pass this one if you sell for the new owners to continue.