Buying a flat with a short lease - lease extension?

zaralondon

Hey all,

When buying a property with a short lease (approx. 40 years) what does a buyer need to do?

From what is on the net, you can only apply for lease extension once you have owned said property for two years. Is it wise to ask the vendor to apply for this with a view to transferring application over to buyer once purchase has gone through?

I am noticing a lot of flats in London with short leases.. just wondering whether this is a sign of the times or if it's quite usual, not really sure as I am a FTB.

Thanks.

Doozergirl

There are always short lease flats around. You will find them if you search the bottom of the market.

You can apply for a lease extension whenever you like, 2 years is the point at which the freeholder must grant you one. You won't find many mortgage companies to lend on something that short. I think it used to be that most would not lend but those that do require 25 years on top of the length of the mortgage - ie. for a flat with 40 years you can only take out a 15 year mortgage. That was in the days of freely available credit so I don't know if they are still offering this. Even back then many lenders wouldn't lend if the lease was less than 70 years.

So to buy with a regular mortgage you will need th eleaseholder to extend the lease for you - if they don't have the funds then I don't know if it can be worked that the lease extension happens similtaneously with completion.

The asking price is either going to reflect the value with or without the lease extension - the values will be very different indeed.

Londonsu

We have just sold our London flat, it had a 47 year lease and we were told that no mortgage lenders would lend on such a short lease so we have had to pay to have it extended by 90 years - it has cost us £41,000 plus we have had to pay all the landlords legal fees ( although we will only pay the £41,000 out of the proceeds of the sale luckily we are moving into a much cheaper area)

There is a statutary right to extend the lease but it all goes through some sort of lease court which can take up to two years

If the seller of the flat you want will not extend the lease himself then a surveyor will give him the selling price of the property without the lease extension and the SP with the LE in our case it was £197,000 with no extension and £240,000 with extension and we sold for just under £250,000

We were also informed that in Inner London where we are it was actually quite unusual to have such a short lease

zaralondon

Thanks! For some reason I have seen so many short lease flats in inner London lately.

Fire_Fox

Everything you could ever want to know about leasehold property:
http://www.lease-advice.org/publications/

zaralondon

Wow! Thanks fire fox!