78 year lease - should we extend if we're selling soon?

andrewv_2

We live in a 2-bed flat with a 78 year lease, worth about £225,000.

A company called Leasehold Solutions have contacted us all in the block offering to manage our lease extension/buying freehold process. The upper end of their estimate, including all costs, to extend the lease by 90 years is £14,000. They say this will add £15,000 to the value.

(Buying a share of the freehold is obviously also an option, for around the same price, but only if all the flats chip in, otherwise it's more expensive for those that do, so we'd probably just extend the lease in that case.)

I realise that the lease is a wasting asset and it's only going to get more expensive to do this later, but we are probably going to move in the next year or two, so...

Is 78/77/76 years really a problem for selling? Will it really put buyers off? We can just assign the right to extend to any purchaser, and let them do it (they don't then have to wait 2 years). Yes, they may ask for something off the purchase price for doing this, but how much?

The main question: are we going to get our £14,000 back when we sell? ie do purchasers actually value a long lease/share of freehold by at least the amount it costs to do this/would cost them to do this themselves?

Thanks for all comments.

pie81

Yes, I definitely think this is worth doing.

As a purchaser I would not want the hassle and uncertainty (eg if not enough other flats wanted to participate) of going through the extension process and would probably discount your flat as a result.

Plus, mortgage companies may be reluctant to lend on a 77 year lease and this will mean you are restricted to cash buyers - a very small pool of buyers.

As to whether you will get your money back: I can't really tell you (though your local estate agents may be able to). But it will definitely make your flat sell MUCH more quickly as will vastly increase the number of buyers willing to consider it.

Richard_Webster

It is sensible to to try to arrange a lease extension - and it may be possible to do it so that you effectively use the buyer's money to pay for the extension.

It is not true that mortgage lenders will not lend on a 77 year lease - most only require 30 years longer than the term of the mortgage, so in most cases that would be 55-60 years. A few.e.g Bank of Ireland, want 70 years.

As for whether you can sell it will depend on how clued up buyers are generally in your area and whether their solicitors point out the issue in clear terms. Although I would warn a buyer, in my area it still seems to be the case that some people do manage to sell 77 year leases.

cuthbert_the_octopus

As someone who extended a lease to sell the flat.

I wouldnt bother.

Banks wont lend under 50-60 years ish.

We extended ours at 53 years.

So had a 125 year lease when we sold, a flat below ours was sold 3 months after us, it was in a bad condition (needed everything doing!) and it sold for £30k less. I suspect to a cash buyer, due to the 53 year lease.

The extension, plus solicitors for both sides came in at £15k.
We extended the mortgage to pay for the lease extension, but am not sure if banks will still lend extra money for this now.

SophieUK_2

I've just been put off a nice flat as it has a 79 year lease. I think if your flat is mostly going to be looked at by first-time buyers like me then it may well put people off - both because it's an extra cost, and one that isn't fixed, and also because of the general hassle. Buying a place is scary enough without extra things to worry about, let alone extra things that could cost you thousands of pounds.

olly300

claireac wrote: »

I realise that the lease is a wasting asset and it's only going to get more expensive to do this later, but we are probably going to move in the next year or two, so...

Is 78/77/76 years really a problem for selling? Will it really put buyers off? We can just assign the right to extend to any purchaser, and let them do it (they don't then have to wait 2 years). Yes, they may ask for something off the purchase price for doing this, but how much?

In this type of market I would do particularly if your flat is only one or two bedrooms as that means you will have a wider range of buyers interested.

There are 3 bedroom flats near me but the only people who are interested in them are landlords.

As the amount is the upper level I reckon if you do some work yourself and use someone else, you will probably find that you can pay much less than that to get the lease extended.

As regards to share of freehold this can be a hassle as you have to set up a company and co-operate to get things done. Normally only a few people are bothered doing stuff and the rest complain when it costs to much. However if the majority of the block wants to go a head with it, if you are moving it's not a bad selling point.

sunnysea83

79 years on a lease is more than enough - its when it gets to about 60 years you need to worry, must lease extensions are done around the 60 year mark.

I wouldnt bother getting an extension, you will still get a good price for your flat.

andrewv_2

Thanks for all the replies so far. I am still undecided.

I've spoken to two local estate agents who both say the difference they would get for the flat with a longer lease would be less than £14k, so they wouldn't advise to do it. They say that yes, there would be more potential buyers, so therefore possibly a quicker sale, but not that much difference in price. They are currently selling flats with shorter leases OK.

(The flat is in London in a popular location near a tube station, and is in good order.)

To my mind, the flat value is diminishing at exactly the same rate as the lease extension price is rising each year, as all further purchasers will realise this and come to the same conclusion. So it makes sense to extend now, when property prices are (apparently) low (the extension price being based on the property price) and when we have this current offer of saving money by getting many flats valued/negotiated in bulk. I have the savings to do it now and they aren't earning much interest elsewhere.

However, this is not reflected in what the estate agents are saying - instead of the price difference between the "long" and "short" lease being pretty much the cost of extending the lease at any given time, it's either much less (some people don't see it as a problem and would buy with perhaps just a small discount) or much more (some people see it as a huge problem and wouldn't buy at all).

SophieUK_2

sunnysea83 wrote: »

79 years on a lease is more than enough - its when it gets to about 60 years you need to worry, must lease extensions are done around the 60 year mark.

I wouldnt bother getting an extension, you will still get a good price for your flat.

But which part are you talking about - the mortgage, or the cost of extension? 79 years should be fine for the mortgage, but it's still gonna cost whoever buys the flat thousands of pounds to extend the lease, and they're still gonna have the hassle of doing it. Anything under 80 years and the lease renewal cost goes up by large amounts because of marriage values.