Lease query

Worried

I am advised by the agent selling the flat I am purchasing that the lease has only 80 years remaining.
I now seem to be hearing everywhere that a lease of this length could cause me problems when I come to sell in a few years, as although mortgageability isn't a problem on a lease of this length, the fear of unmortgageability may put potential buyers off, as my buyer will be concerned about getting the lease extended so he either won't get caught with an unmortgageable property on resale, or so his buyer won't be frightened off by the fear that he will be caught.

Do you have any experience of this at all? Do you think that I would have a problem selling the property on with a lease of 77/78 years remaining, or that I will be asked to purchase a lease extension, or reduce the market price in order to sell?

I am aware that I could not apply to renew the lease until I have owned the property for 2 years and that once the lease falls below 80 years (which I believe it will do in November of this year) 'marriage value' kicks in and the cost of renewing the lease will greatly increase. Do you think there would be any possibility of asking the current vendor to renew the lease, as they have lived there 18 years and the lease is still currently 80 years plus, so marriage value would not come into play?

Do you have any advice on this issue. Do you think I am worrying unnecessarily? I am just concerned about having to face footing the bill for the lease renewal, or having to reduce the price to sell the property, neither of which I could afford to do.

I have had the survey and valuation done, but I'm wondering whether to pull out now and lose the money I've paid out, rather than face the nightmare of renewing in 2 years.

Has anyone out there successfully sold properties with leases under 80 years and not faced questions about lease extension, or without reducing their asking price?

Astaroth

I am not an expert in these things but I would be surprised if a 77/78 years remaining lease would have any significant price difference to one with 97/98 years remaining.

avfc1982

You'd be suprised then Astaroth! Some mortgage companies will not touch an application if the lease on the property is less than 80 years.

I'm a first time buyer and from what I've heard in the brief time I've been looking for a property in London is that anything below 80 isn't great as the costs for renewal can escalate the smaller the term on the lease gets, depending on the freeholder. Of course there's the lease arbitrage service to overcome this should the freeholder hold the leaseholder to ransom but it's not something I'd want to get involved with personally.

I've actually just had an offer accepted on a property with a 76 year lease, but we came to an agreement with the current owner that the lease would be renewed to 999 years prior to completion and we'd split to 10k renewal cost.

If I was giving advice to a first time buyer, or anyone else for that matter look for a property with a lease at 85 years+. If a property came up that you really wanted to get your hands on seek advice from your solicitor around the lease, speak to the vendor about the possibility of lease renewal, speak to the freeholder about what the renewal cost may be and get it in writing should you need to renew it at a later date.

I'm no expert by any means but just some info based on my experience so far.

Doozergirl

It would be cheaper for everyone if your vendor were able to extend the lease for you.

Our second purchase was a flat with 78 years left on the lease. We sold on with 76 years left on the lease. When they tried to knock us down, we told them that the asking price reflected the cost and they didn't question us at all. I saw the flat sold on again under 2 years later so they can't have sold it on with an extention either.

I've also just bought with 68 years on the lease and am about to remortgage. Our mortgage advisor was extremely confident of finding a mortgage with no problem as shorter leases do seem to be commonplace, especially in London where many leases are 99 years to start with!

Worried

avfc1982 - at what stage did you approach the vendor about the lease renewal? Did this delay the sale at all? I am at the stage where I have already had the valuation and homebuyers report and the vendor has found a property to buy. Do you think it would be unfair of me to ask for the renewal at this late stage? Will it not delay the transaction significantly? I read on another thread that a buyer asked their vendor to renew the lease, but the sale took 7 months to complete because of the length of time it took to obtain the extension. How long did it take your vendor to obtain the extension? How long did it take for you to complete? Should I offer to pay for the extension, or meet half the costs? What is usual?

Bun

I've had three flats now with 78 or 79 years on the lease and have had no problems at all. The mortgage companies (Royal Bank of Scotland and Halifax) were happy as long as there was at least 60 yrs on the lease to start with. Another variant is as long as there is 40 yrs left after the end of the mortgage term.

lil_3

Would agree with above note. From the lenders point of view provided there is 30 plus years left on the lease term at the end of the mortgage term they will normally see the property as a saleable asset and will lend. With regard to getting the vendor to extend the lease/paying to do this yourself post purchase, I would consider how long you see yourself staying in this particular property.

Worried

I would only be planning to stay there until the end of my fixed rate term as then I would want to buy a slightly bigger place with my boyfriend ideally, so 2 years max. The lease would be down to 78 years when I come to sell. I know mortgageability is not an issue on a lease of this length, but I'm just concerned that the property could stick because my buyer may be concerned about getting the lease extended so he either won't get caught with an unmortgageable property on resale, or so his buyer won't be frightened off by the fear that he will be caught. I know it's all a nonsense as you can get a mortgage from most lenders on a lease above 60 years, but I know the panic sets in much earlier and I'm concerned about being lumped footing the bill for the renewal and it eating in to the capital I would need to buy my next place. Do you think it would be wise to get the vendor to get this sorted now whilst it's cheaper, or do you really think it's an unnecessary complication and expense with a lease of this length? The place would be a FTB I'm sure, so I don't know how clued up a FTB would be about issues of lease length etc., so I'm still really unsure as to whether it would be an issue on resale or not.

Doozergirl

I think it is worth asking how long it would take your vendor to renew the lease. I would also ask the estate agent to be honest about how easy flats with leases of this length sell. Personally, if there were any great issue with buyers I think there would be more disparity in asking prices.

I'm fairly sure that most people would be happy to take a small reduction in price as compensation.

Worried

I am considering getting my solicitor to approach the vendor about getting the lease renewed before completion, as I am aware it will be far cheaper for them to renew the lease whilst it is still 80 years, than it will be for me to renew it when it falls to 78. If the vendor is not agreeable to this, or it will be too time consuming and delay the sale considerably, does any one know if it is possible for the vendor to apply for the renewal and then transfer the application to me on completion? Would it be legally binding if they did this, or could the freeholder decide not to co-operate with me, once the property becomes mine, as he knows that I will not be entitled to an extention until I have owned the property for 2 years and that he will be able to get considerably more for the extension then, as it will be under 80 years and he will be entitled to marriage value.

Doozergirl

I don't know the answers to your questions except that whilst it would be preferable to get the lease extended now, the freeholder's half of the marriage value in two years time would be minimal, it's just that it's zero now. It wouldn't cost you thousand upon thousand more.