Extending lease on Share of Freehold flat

chrigil

I'm interested in buying a flat which is Share of Freehold but only has a lease of 63 years left on the lease. Presumably the SOF was done after the initial 99 lease was arranged, thus making the lease pretty much irrelevant.

My question(s) are as follows:

1) Would I need to extend the lease or is it totally irrelevant?
2) If I do need to extend it, do I need to compensate the other shared freeholders (i.e. pay them to extend as I would have had to the freeholder if it was owned by one person) or is it simply the case that I 'wouldn't need to pay myself' as the estate agent suggested.
3) Based on the answers to the previous 2 questions, would I be liable for Marriage Value Tax?

Thanks in advance,

Chris

Richard_Webster

The lease is not irrelevant because it governs the relationship between the freeholders (group of lessees acting together) and the lessee of just that flat.

The lease will need to be extended and the other share of freeholders will have to agree to this. Usually they will, because they may be in the same boat themselves, wanting their own leases extended. However I have known of cases, particularity where other leases have already been extended where they have asked for a large sum of money.

You are only entitled to a lease extnesion once you have owned the flat for 2 yaers and you might have to go through the statutory process and pay a premium determined under the rather complex rules involved for that extension, which would include an element for marriage value. There is no such thing as "marriage value tax.".

Have a look at this thread where some of these issues are explained:
http://forums.moneysavingexpert.com/showthread.html?t=2111207

chrigil

Thanks Richard.

When you say "You are only entitled to a lease extnesion once you have owned the flat for 2 yaers" do you mean that it's possible to get one before this time but I wouldn't be able to force the issue?

Is it possible that if the other freeholder(s) were ammenable to the idea, that the lease could be extended without any cost, other than legal fees?

The alternative of course is that the current owner could extend the lease and make his money back through the sale of the property.

DVardysShadow

chrigil wrote: »

Thanks Richard.

When you say "You are only entitled to a lease extnesion once you have owned the flat for 2 yaers" do you mean that it's possible to get one before this time but I wouldn't be able to force the issue?

Is it possible that if the other freeholder(s) were ammenable to the idea, that the lease could be extended without any cost, other than legal fees?

The alternative of course is that the current owner could extend the lease and make his money back through the sale of the property.

The 2 year entitlement really means that the seller is in a much stronger position than you to get the extension. So make the seller get an extension as a condition of your offer.

Richard_Webster

When you say "You are only entitled to a lease extnesion once you have owned the flat for 2 yaers" do you mean that it's possible to get one before this time but I wouldn't be able to force the issue?

That's right.

Is it possible that if the other freeholder(s) were ammenable to the idea, that the lease could be extended without any cost, other than legal fees?

This is what normally happens, its just that you cannot compel it.

The alternative of course is that the current owner could extend the lease and make his money back through the sale of the property.

Yes, he would still have to get the other lessees/shared freeholders to sign - but he could do it that way.

The key thing is that you should contact the other lessees to make sure that the seller isn't hiding anything, and the others are all happy to extend leases (and even as a necessary preliminary, join in to transfer a share in the freehold to you.). See the other thread as to why sometimes there is a problem.

chrigil

Cool thanks (both of you).

When I contact the other leasees, presumably it would be done by my solicitor. Whilst it'd be quicker and easier, I'm guessing that knocking on the front door and having a quick chat isn't really the way to proceed?!

Fire_Fox

Are you confident you can get a mortgage a the lease of just 63 years? You have no relationship with the other leaseholders at present, the current owner will have to start the ball rolling (if they are willing). Do you even know that the current residents are all leaseholders, no flats are let? Are there regular board meetings that you could attend once you are a leaseholder?

chrigil

Fire_Fox wrote: »

Are you confident you can get a mortgage a the lease of just 63 years?

This is one of the things I want to avoid. Basically, I won't even bother if the lease cannot be extended I don't think. I'm not willing to try to get a mortgage and then potentially be refused because of the lease.

I spoke to the estate agent today about it and she really played it down as a non-issue becasue I could 'simply renew the lease for free myself once I own the freehold'.
Whilst this may be true in theory, as we can see from the answers above, it may not be that simple, I may not get a mortgage (and could potentially harm my credit rating in the process).
It also of course brings up the question of why the current owner doesn't simply make his property far more sellable by doing this '5 minute job' himself. He already has a relationship of some sort with the other freeholders.

Time to contact the EA and suggest this methinks!

Fire_Fox

The estate agent does not work for you, why are you entertaining their advice?? Extending the lease will may well make the flat more valuable, so be prepared to lose out.

I would suggest you read this thoroughly before going any further:
http://www.lease-advice.org/publications/

DVardysShadow

chrigil wrote: »

... I spoke to the estate agent today about it and she really played it down as a non-issue becasue I could 'simply renew the lease for free myself once I own the freehold'.
Whilst this may be true in theory, as we can see from the answers above, it may not be that simple, I may not get a mortgage (and could potentially harm my credit rating in the process).
It also of course brings up the question of why the current owner doesn't simply make his property far more sellable by doing this '5 minute job' himself. He already has a relationship of some sort with the other freeholders.

Time to contact the EA and suggest this methinks!

Yes, spring it back on the EA. Say that if it is a non issue, then it's a condition of your offer. And if it turns out to be too hard, there is no offer.

pastmybest

chrigil wrote: »

I spoke to the estate agent today about it and she really played it down as a non-issue becasue I could 'simply renew the lease for free myself once I own the freehold'.

Absolute rubbish as I have been in exactly the same position and lost three sales because of a short lease.So embarked on getting the lease to 999 years which took 8/9 weeks from wanting to it being done and dusted.

Two issues were first getting my lender to agree and second getting the other freeholders to agree. The latter was more difficult and no I didn't let my solicitor approach them as he would of had to suggest they take their own legal advice. He told me in what format I needed their permission and I approached them but still found getting the papers signed a time consuming pain.

Sorry but in my case it was not a non issue even though I am the seller. The EA is talking silly.