Leasehold on the property I'm buying

Stubbsy05

Okay, I'm near the point of excahnging on a flat I'm buying.

The Flat has 75 years remaining on the lease.

How important is it that I check to see how much it is to extend to 99 years before I buy the property?

Cara79

Ok, I'm not the best person to answer, and am sure someone else will be along shortly. But I'm sure I've read previous threads where trying to extend a lease which has less than 80 years remaining can be very costly indeed!

I suggest you try and find out how much this can be as I was led to believe it could be thousands.
x

goldbyron

I would have thought quite important depending on your financial situation. It can cost around the £10-12k mark in my experience.

Also I think you need to be in the property for two years to give notice you want to extend the lease. You may wish to ask the current vendor to give notice to extend however you may not want to jeopardise your purchase so close to exchange. It is up to you and the risks you want to take.

The website https://www.lease-advice.org is very helpful for leasehold information.

JennyW_2

Stubbsy05 wrote:

Okay, I'm near the point of excahnging on a flat I'm buying.

The Flat has 75 years remaining on the lease.

How important is it that I check to see how much it is to extend to 99 years before I buy the property?

if you're going to pay for an extension, personally I would go for greater than 99yrs. We've just bought a flat with 999 years on the lease

EdInvestor

goldbyron wrote:

You may wish to ask the current vendor to give notice to extend however you may not want to jeopardise your purchase so close to exchange.

The website https://www.lease-advice.org is very helpful for leasehold information.

It's customary to ask the vendor to set this in train before the sale, ie get the agreement of the freeholder to actually do the deal for an agreed amount, if not actually sign and seal it. Alternatively it's often possible to reduce the price to take account of the need to do it.

I suggest you sort this out in some way before buying because even if you have no mortgage, a lender for a buyer later is almost certanly going to question the deal and you will have to pay.

Ask your solicitor about it first and then speak to the agent.

Julysea

Don't touch it with a bargepole until you know how much it will be and preferably have got the vendors to extend it as part of the sale! We've just got well caught out by this. We bought our maisonette 5 years ago and no-one mentioned that we could get caught out by our lease which was then 81 years long. Now we ahve come to sell and suddenly everyone knows that our 76 year long lease is a huge problem and we've had to pay out 5 grand to extend it before we can sell. And we were lucky, our neighbours had to pay 19 thousand to extend theirs. So, my advice would be, get things done before you buy it!

theGrinch

I understand that once you have owned a property for more than 2 years you can turn to what is called the "marriage contract", which is a formula in determining the value of a lease extension. Outside this it comes down to negotiation with the freeholder and as said previously, it helps if the vendor has started discussions.

goldbyron

For the lease extension, the 2002 Act has abolished the previous residency test and the property now has to be owned by the qualifying tenants for a period of at least 2 years before a claim is made. It has also abolished the low ground rent test and also provides for the valuation date to be fixed at the date of the claim. There is no marriage value where the unexpired lease term exceeds 80 years. Otherwise, the marriage value is fixed at 50:50.

The calculation of the premium to be paid for lease extension is set out in Schedule 13 part II of the Leasehold Reform, Housing and Urban Development Act 1993 and is a total of:

a) The diminution in value of the landlord's interest in the flat,
b) The landlord's share of the marriage value and
c) Compensation for loss arising from the grant of the new lease.

tazgirl

Def find out before you buy, and ideally arrange somehow for the current owner to get this process going before exchange. As others have said, depending on the value of the flat, you could be looking at around £10-15k to extend. Also, this figure will only go up with time as per goldbyron's post.

The chances are that the sellers will be aware that they're selling with a short lease, and may have factored into their planning that they may have to do something about it to sell. However, also bear in mind that flat may have been priced to take the cost of this into account.

Check also whether any conditions of the lease would change if extended - also whether ground rent would increase/decrease.

(I say this from having just sold a leasehold flat with a similar length lease and feeling sick every day up until the moment of exchange that buyers would insist on lease extension - luckily for me they obviously didn't read forums like this...)

EdInvestor

The chances are that the sellers will be aware that they're selling with a short lease, and may have factored into their planning that they may have to do something about it to sell. However, also bear in mind that flat may have been priced to take the cost of this into account.

Indeed. And in some cases, a flat with a lease of this length won't be any cheaper than one with 99 years. I wouldn't call this a "short lease". It has to be down near the 30 year level to be in that category. This level of lease is quite normal - and will continue to be so, because it reflects the beginning of the popularity of converted flats - and their mortgageability - from the late 70s on.

Before then, builidng societies had a monopoly on mortgages and they wouldn't lend on converted flats.After they lost their monopoly and the banks were happy to lend, conversions went in full swing with most of them being sold on 99 year leases, now dropping down to the 75 year mark.

natwill_3

Please be careful, where I live its 20k to extend lease...flat valued at 240k with under 80 years left plus legal fees

Alot of people getting more savvy and its an extremely expensive business

Try an dget a quote and renegociate price