Selling flat with short lease... extend it now or wait?

karie

Hello,

I'd be grateful for any advice on selling a flat with a (relatively) short lease.

I'm hoping to put my flat on the market in a few weeks time. It is worth around £100k.

The lease has 74 years remaining on it. I have enquired about extension and have been offered a couple of options:

1. new 99 year lease at a cost of £4k with ground rent of £200, to be reviewed every 7 years in line with RPI
2. 90 year lease extension (which would bring it to 164 years) at a cost of £6.5k, with peppercorn rent

I do not want the length of the current lease to prevent the flat from selling and so am considering extending the lease (favouring option 2). However, although the numbers quoted are not that unreasonable, it is still a lot of money to me. So obviously if I can avoid having to spend £6,500 on a new lease that would be much better!!

My options are:

1. take the hit and extend the lease
2. wait... and extend it if a buyer insists upon it
3. wait... and try to negotiate splitting the cost of a new lease between myself and the buyer
4. wait... and hope that the buyer will fund the lease extension/new lease

But on the flip side, it may never get to a negotiation stage if all buyers are deterred by the lease in the first place!

Any thoughts?

thanks!!

fallgirl

I was in the same position 4 years ago and would recommend that you extend the lease as buyers will be discouraged by the short lease. I paid £10,000 for my extension which still grates but people seem more aware of the risk than I was and mortgage companies may be reluctant to lend. (Flat sold 3 years ago and I will never buy leasehold again.)

PasturesNew

There's no point waiting, 99% of buyers would expect you to extend it. If you extend it, the flat's worth more than you pay. A new buyer wouldn't be able to extend it for 2 years (during which time the price would go up and it leaves a big uncertainty for them over that time period).

Just start the process, get that ball rolling now.

You need to remove obstacles when selling a property. Many potential buyers wouldn't even view it with a short lease. For many others they wouldn't be able to raise a mortgage on it (some mortgage companies won't do it under 80, others won't mortgage under 75 years).

karie

thanks for your comments.

not sure if extending the lease will actually improve the value of the property. it is more of a necessary evil really...

Ulfar

karie wrote: »

thanks for your comments.

not sure if extending the lease will actually improve the value of the property. it is more of a necessary evil really...

Extending the lease will improve the value in that it will remove a major obstacle preventing someone from buying your flat.

Richard_Webster

Unless the landlord/freeholder is particularly difficult, it is usually possible to sort out an extension with the freeholder and have it all lined up, and then use the buyer's money to complete the lease extension and immediately pass it on to the buyer on completion. You therefore agree a deal for the sale of an extended lease.

Slinky

We're in a similar situation, flat worth about £90-£95K with a 72 year lease remaining. We've owned it for 4 years, didn't have any problem raising a mortgage on it and our solicitor never raised the length of the lease as an issue when we purchased.

We're sticking it on the market and mentioning it has 72 years on the lease on the details. If some people are put off so be it, at least they'll be put off at the start rather than during the buying process hopefully. Two other flats have sold in the block in the past few weeks and I don't imagine for one minute that people have been extending leases - they are studio flats with people on tight budgets.

If it doesn't sell, we'll have to look at our options.

karie

Thanks all...

Any views on whether extension costs might be negotiable?

Also whether lenders are likely to allow you to increase your mortgage to fund it?
Presumably not in current climate...
I have around 20-25% equity. Am with HSBC on a lifetime tracker.

Fire_Fox

As the lease becomes ever shorter it will be increasingly difficult for a buyer to mortgage, this means the flat will reduce in value. Extending the lease may only increase the value by what you spend or even slightly less, but it will make the flat saleable. Have you made an informal enquiry or served formal notice on the freeholder?
http://www.lease-advice.org/publications/documents/document.asp?item=8

A new leaseholder does not have the right to extend the lease for two years after purchase which means it should be done at the same time as the conveyancing. This means the buyer effectively pays for the actual lease extension, the vendor just pays for the valuation and their own legal fees. This obviously means you do not need to increase your mortgage but the property needs to be priced realistically for a 74 year lease. Where have you got the £100K figure from?

You have the legal right to increase the lease by 90 years with a peppercorn rent. To value this try the calculator here or, better still, appoint a valuer. You can certainly try to negotiate the price, but you need to get a wriggle on as the agreed price needs to be clearly stated on your estate agents particulars. There is no mileage in doing so once you have accepted an offer, you need an agreed price to show to a buyer and you do not want to waste time.
http://www.lease-advice.org/

karie

Fire Fox, thanks that's useful.

I have enquired informally and it does appear simpler to go down this route - appoint my solicitor and pay the fee requested. Is it necessary to get your own valuation?

Values quoted for my flat are recent estate agent quotes.

Karie