The Great ‘lease buying or extending' Hunt

ferraria

You should be ok. I'd speak with a mortgage broker (pretend you're buying a property with a 60 years lease) to check my words, but mine tells me there are a few lenders who are still willing to lend on properties with at least 45 years on the lease. I think the measure is 20 years remaining after you paid off the mortgage (assume 25 years).

Obviously you'll get lower offers, but there are people out there (like me) who are willing to take the risk to buy a property on a short lease (esp. in sought after areas) cheaply, then extend after a few years.

cazza44

The lease-advice.org/calc site has lots of info and the link that I would have liked to have added (but can't because I am new);) gives a rough estimate to what it believes you should be paying for the premium. I put in the values for the extension we did and its highest estimate was £1000 under what we paid for the premium, so whether it is inaccurate or we were ill advised, I guess I will never know!

John_Pierpoint

Minorlass wrote: »

I and three neighbours purchased the freehold of our flats a number of years ago. Over the years there have been a few issues to contend with which revolve around neighbour relations and wanting to extend the lease term. We have a shared freehold so we each own 25%.

Nobody wanted to go down the forming a management company route, posting accounts etc., hence the shared freehold route. We all look after our respective properties and have joint responsibilities as well. All sounds good? NO!, the relationship between you all is so critical and with even legal agreements in place we have one party that won't sign any papers .......................

I have always thought that a terraced house is a much better bet than a flat. Owning your own bit of ground gives a much better balance of rights over obligations. So I have managed to avoid owning a flat, though at one stage I owned the freehold of two flats, with about 20 years of a 99 year lease left.
[Great fun playing the two tenants off against each other - the new guy, who inherited upstairs and needed something mortgageable to tart it up and sell it - really shot himself in the foot, when he upset the male, female and female teenager living downstairs (not married). By playing one off against the other the value of the freehold went up 20K.]

However I have recently been a "victim" of the flat with a jointly owned freehold.
In my case I was selling a house to Mr Smith and Miss Jones; they were setting up home together and financing the purchase in part by selling their two flats.
Everything seemed to be going well - they had fought off two other potential purchasers and appeared to have buyers lined up for their flats. It was late January and they wanted to move in by Easter - No problem!?

Then there was that long drawn out period of 10 weeks instead of five, when everything should have been in place and nothing is happening. The seller [me] at the head of the chain, starts doubting his judgement and probably the first time buyers at the bottom of this mini chain are thinking "gazump??".

In the event we exchanged on a Friday afternoon and completed at about 15:00 on the next Monday I]"Sorry you will have to sit in the removal van until I get a call to say the money has been paid"[/I.

So what was the problem? One of the 4 owners of Mr Jones's freehold had decided to go on the holiday of a life-time, back packing in the mountains. He was completely oblivious to the chaos he was causing as he explored Machu Picchu.

Thank goodness he had not been struck down with a stroke or simply gone missing like Lord Lucan:

http://property.timesonline.co.uk/tol/life_and_style/property/article824726.ece

http://news.bbc.co.uk/1/hi/uk/10243471.stm

http://wapedia.mobi/en/Feu_duty

If the freehold is owned by a company, presumably the purchaser of a flat only needs the signature of one director and the company secretary; halving the risk of one of the owners being lost on the Inca trail.


John

PS If one wants to get rid of a troublesome secured tenant, is it still possible to buy a very short lease property and then persuade (bribe) the tenant to move there?

scotbruce

eilidhcatriona wrote: »

A small point - you state it is "unique to the UK". Perhaps, but that implies it is the system in the whole of the UK. Scotland however has a much more straightforward system so you might be better to discuss this as being in England and Wales.

Exactly - article amendment required, please.

fallgirl

I would never buy a leasehold again but people are not always in a position to choose. The buying and selling process is more expensive because of the lease. I extended the lease but this took a painfully long time because I had a useless solicitor who was not chasing up the freeholder's equally useless solicitor. They were getting paid the same (by me) regardless of delays. I felt quite powerless and felt that the lease extension was a form of blackmail "£10,000 or you cannot move". The CARL website was a great source of sanity but a change in the law is long overdue.:mad:

adh983

Mrs_Money wrote: »

Does anyone have any ideas about the difficulty of selling a flat in a 1960s block with around 60 years left on the lease? Is it a complete non-starter?
My DH will inherit his father's flat when the estate is settled and the residents own management company are pushing him to extend the lease, saying it will "only cost a few hundred pounds". Looking at other info on here - I'm a bit shocked that the cost is likely to be much, much higher.
DH, as executor, only wants to sell the flat and be shot of it, because the money has to be divided up amongst the beneficiaries of the will, so the more we spend now the less there is for everyone - how on earth do we make the right decision?
Will it be a case of if we don't spend on the lease - then we can't get much for the flat? Or perhaps we won't be able to sell it at all!

From my experience of living in a block of flats and working for a managing agent company in the past, any lease less then approx 70 years is going to be very difficult to sell the property or get a mortgage with good rates.
buying the freehold needs at least 50% of the leaseholders who can then force the freeholder to sell, you then as freeholders will be able to charge the leaseholders who did not join in when they want to renew their leases, however it is a very expensive process, especially if you only have half the leaseholders. Alot or mortgage companies will let you add the cost of purchasing it to the mortgage as they see it as added value to the property.
to renew the lease is also expensive as the purchaser needs to pay all the freeholders costs, however once the lease is extended you do not have to pay ground round anymore.

Doozergirl

Mrs_Money wrote: »

Does anyone have any ideas about the difficulty of selling a flat in a 1960s block with around 60 years left on the lease? Is it a complete non-starter?
My DH will inherit his father's flat when the estate is settled and the residents own management company are pushing him to extend the lease, saying it will "only cost a few hundred pounds". Looking at other info on here - I'm a bit shocked that the cost is likely to be much, much higher.
DH, as executor, only wants to sell the flat and be shot of it, because the money has to be divided up amongst the beneficiaries of the will, so the more we spend now the less there is for everyone - how on earth do we make the right decision?
Will it be a case of if we don't spend on the lease - then we can't get much for the flat? Or perhaps we won't be able to sell it at all!

You have mentioned that 'the residents own management company' have stated that it only costs a few hundred pounds in which case it might be that they have already purchased the freehold collectively? It might be that it costs only the legal fees associated if there is already a share of freehold involved.

If it is just a few hundred pounds then great, but if it is a true leasehoold flat and the freeholders want full value, then there isn't a chance that it would cost a few hundred pounds. As already suggested, use the calculator on the LEASE website to get an idea of the lease extension cost.

Ultimately, the flat will be devalued by around the cost of extending the lease and quite possibly more if it ends up as an auction property. To save losing more than you need to, if you can get agreement on the extension and it is indeed expensive then it is possible to sell the flat for a price with lease extension included and complete on the extension at the same time as the flat itself, using the buyer's money to pay for it, iyswim. Your solicitor will administer that for you.

Many mortgage lenders don't lend below 70 years although it used to be the case that some would offer mortgages on leases where the number of years left totals more than (30 + the term of the mortgage) eg. 25 year mortgage plus 30 years = you can borrow on a 55 year lease. Not sure if those are still available post credit crunch!

pollyhelen

Hello

We just had annoying leasehold experience with a house. First time buyers, property looked too good to be true... it was.. it didnt say anything on the particulars and we were too green to notice, and so we had offer accepted - last week this is, and then discovered "incidently" from the EA when we were completing our mortgage application. 65 years to run, our solicitor told us to run too because of the nature of the charitable estate who owns the freehold. Mortgage guy said no good deals coming up for this sort of request. Turns out another buyer had already found out and pulled out, and the vendor did a poor show of feigning surprise, and then actually knowing lots of detail. If only he had been upfront. We've been quoted up to £10k, and we were already at the top of our budget, so we have withdrawn the offer and said come back when you've sorted it.. and started looking elsewhere.

now we know!

symesd

I have a property which is already FREEHOLD and was wondering if you are able to sell the freehold if you are living in the property and have a mortgage, and if yes what could you sell it for and who/how would you sell to or go about it...

I ask this as I have some debts and wondering if it would be possible & would it be enough to pay off my debts.

Thanks

Doozergirl

symesd wrote: »

I have a property which is already FREEHOLD and was wondering if you are able to sell the freehold if you are living in the property and have a mortgage, and if yes what could you sell it for and who/how would you sell to or go about it...

I ask this as I have some debts and wondering if it would be possible & would it be enough to pay off my debts.

Thanks

Forget it. It will cost a fortune to split it into lease and freehold and your mortgage provider will not like it. I doubt they would agree at all without a complete remortgage = lots of expense.

The only person that will buy your freehold is someone looking to make money out of you. You need the lease long enough for your tenure to be safe and the value of your home up which makes the freehold worth hundreds, not thousands and you'll end up paying hundreds in ground rent each year. It will cost more to administrate than you'd ever achieve from selling it.