FTB - about to exchange & lease issues

wand3rlust

All

I'd be grateful for any advice on my situation:



Background

• Buying 1 bed conversion flat in zone 2 for £235k
• Structural survey came back with no issues
• Seller not in chain (nor am I as FTB)
• Mortgage offer recieved
• Seller keen to exchange asap and I am in a position to...

but...

The lease is short, and I don't know how much it will cost to extend (yet).

The seller's solicitor has recently finally responded to mine with details about the lease.

When the offer was put in, the estate agent said it was a long lease. The offer was accepted, but I pushed for the exact length, which he then told me was 76 years. My lender is prepared to lend with this amount remaining.

Since then, I've been asking my solicitor to try to find out how much it will cost to extend the lease, and whether the seller is prepared to do it as I'm concerned that I will have trouble selling the property on in the future.

The seller says that he is willing to serve notice to extend, but I would be responsible for all associated costs.

I like the flat, but would pull out if it seemed like the wrong decision financially - putting in an additional, say, £10k to extend the lease and make it sellable in the future seems like considerable extra expense now and I'm not sure whether I should walk away.

I'm unsure what my next steps should be beyond finding out exactly how much extra it will cost.

Any advice?

wessexw

Does your lender know that it's a short lease? Some lenders will have a problem with a shorter lease and if your mortgage was agreed on the basis of a longer lease, you could be in trouble. Surely the length of lease would have been on the HIP though?

wand3rlust

The lender knows it's 76 years and will lend on that.

In their offer, they say they assume that extension costs (which they don't ask me to verify) will be under £10k. I suppose I want comfort that they will be.

The EA has sent a couple of links to try and work out what the extension is likely to be, but before a surveyor is instructed, (which I suppose would be after completion) it's really just a guess.

I'm just wary that it'll end up being a lot more than I can afford and don't know how to mitigate this risk - if you can, and if it really is a risk.

ILW

I think you will be very lucky to extend the lease for £10k. What is the freeholder saying?

wand3rlust

Nothing yet - my solicitor is asking the seller whether they've been in touch with the freeholder (assume this is a big no), and if not, whether we contact the freeholder directly.

sooz

Look at www.lease-advice.org

I think they also have a very basic calculator for working out lease extensions.

If you do go ahead, you should ensure the vendor starts the paperwork, or it will delay your purchase of a lease extension by 2 years via the formal route

However, there is nothing to stop you asking the freeholder now if he wants to suggest a price via the informal route.

I'd suggest you take the maximum price of extension, & drop your offer by that much plus extra for your time & effort.

HRV

I think the term 'long lease' refers to the type of lease rather than the number of years, I think a short lease is like a 10 yr on a shop.

I would NOT buy it without knowing the exact cost. I have had to extend my flat lease- valued at 75k for purpose of the lease- as i was ill advised when purchasing (was 66 when purchased)- that cost me (£9700 inc costs) and I had to employ someone to negotiate it as the terms offered were rubbish and not what they should be!!

As it's under 80 years I understand the cost goes up considerably- something about 'marriage value' (I think). The cost is determined on value. Working on that I would think it will be at least 3x the cost of mine.

I am only talking from experience and what I think (im not a professional at this) but I wouldn't want anyone to get in the mess I did

Hope that helps

wand3rlust

Thanks for all the replies.

The seller apparently sought a quote last year and was given a range of 9-18k with an expected cost of approx £13.5k.

Using the lease-advice calculator gives £8-11k. This is clearly less accurate than solicitor's quotes, but was helpful to check that the numbers aren't wildly different.

The seller has already said that they will start the process so that I don't have to wait 2 years to do the extension, which would be my preferred option as chances are it will cost a lot more in 2 years time.

I haven't replied to the EA yet. I'm tempted to say that I want a reduction in the price - but will this scare away the seller and make the transaction fall through entirely?

On top of that, I have to consider whether this has any impact on the mortgage offer.

Fire_Fox

What are land registry sold prices for the street and area for properties of similar sizes? You should expect the one you are buying to be £10K cheaper. Not sure what you mean by impacting on the mortgage offer, they will lend you the same amount you just need to find a much larger amount in cash.