Leasehold flat selling question

lewpster

Hi,

Am hoping someone on here can help me with a small question. My boyfriend is selling his one bedroom flat shortly and I have just been told by one estate agent he may have problems selling it as there are just over 81 years left of a 99 year lease?

He advised me that most mortgage companies will be reluctant to lend to potential buyers - is he right or will we be ok?

Thanks

Lewpy x

<sebb>

Most mortgage companies have a minimum lease length, usually 70 or 80 years. At 81, it most likely wont cause a problem with the lender, but may cause a problem with the buyer. At under 80 years, lease extension becomes more expensive.

Check out this site for more details on extending leases

http://www.lease-advice.org/

lewpster

Thanks! Thinks it something he'll seriously have to consider. Although we'll be paying out now, it means the flat will be more saleable and fingers crossed we should be able to still make the equity we need to move up the housing chain : )

<sebb>

You don't HAVE to extend the lease, but it's worth investigating how much a lease extension would be and you could factor that into the price. Most buyers would prefer not to have the hassle of sorting out their own lease extension, so it might be a good idea. Plus your bf is in a better position as you need to own the flat for 2 years before you have the right to extend. And once the lease falls below 80 years you have to factor in what is known as "marriage value" making the extension potentially more expensive.

Have a good look around the site I linked to and then make your decision. I believe there is even a calculator on there to give you an estimate of the cost of extension, but don't forget to factor in the legal expenses of doing it.

If you don't extend and factor that into the price, make sure you are upfront from the start about it as you don't want to get halfway through the selling process and find the buyer trying to renegotiate on the price because of it, or even worse, pulling out altogether.

See this link for more details on how the cost may be calculated

http://www.lease-advice.org/publications/documents/document.asp?item=10

HRV

Once it goes under 80 yrs it will increase the cost of extension massively.

Saying that I got a mortgage on my flat with 66 yrs- wish I hadnt as I got stuck with the 10k lease extension cost - but was very badly advised by my solicitir :mad:

RedSoleShoes

I don't understand why some flat leases start off so short. Mine was built in 1990 and had a 999 year lease then!

timmyt

as a conveyancing solicitor, he is wrong. fact.

what he should have said is that a buyer will reject it, as eventually if they hold on to it for say 6 more years he will find another buyer from him will want it extended, as lenders get nervous as it gets closer to 60-65 years (CML Handbook says 50-60 in many cases) but common practice is to get nervous when you get into 70s.

so he may be asked to get a lease extension. depends who owns the freehold (if he has a share of it it will be pretty painless) and how friendly the landlord is.

<sebb>

timmyt wrote: »

as a conveyancing solicitor, he is wrong. fact.

what he should have said is that a buyer will reject it, as eventually if they hold on to it for say 6 more years he will find another buyer from him will want it extended, as lenders get nervous as it gets closer to 60-65 years (CML Handbook says 50-60 in many cases) but common practice is to get nervous when you get into 70s.

so he may be asked to get a lease extension. depends who owns the freehold (if he has a share of it it will be pretty painless) and how friendly the landlord is.

I'm sorry, I don't understand? Who is wrong? The EA?

A buyer MAY reject it, IF it is not put to them upfront about the short lease and if the cost of a lease extension is not factored into the price. If you reduce the price enough to account for the hassle and cost of a lease extension, then someone may be willing to pay deal with this at a later date.

Lenders don't just get nervous about 60-65 year leases, they often just reject them. Each lender has it's own policy, some are 80 years some are 70 some are something else entirely. If you want to appeal to as many buyers as possible, then extend the lease. If you don't have the cash available, then reduce the asking price to reflect the lease and make sure any potential buyers are fully aware of what they are getting into and get them to check their mortgage before committing any further fees like survey costs or solicitor costs.

Lease extension may be easy if the bf owns a share of the freehold but it may also not be. There is nothing to say the other freeholder is a reasonable person and could get difficult. Usually this isn't the case though.