The Great ‘lease buying or extending' Hunt

bowesyb5syncro

we have a leasehold house we bought it 5 years ago it was our first house we knew it was leasehold and that the local council held the lease but around the same time the council transferred its housing stock to a housing trust we get a bill for the ground rent £10 pa which we pay but we also get a bill for insurance but i have never paid this as i have my own and my solicitor was aware of this at the time we bought i have phoned the housing trust and they tell me they own my house but im responsible for all repairs etc and i have to pay this insurance i have told them the cover wasnt suitible for what i wanted i have unlimited cover with contents there insurance company told me they couldnt qoute me as they dont do unlimited cover so i asked to buy the freehold and now they say they arent legally obliged to sell it to me as they are a registered charity but they dont own it only lease it from council they have never sent me any policy details i also asked them if they owned my house then they should be responsible for repairs etc but they said they wasnt can i go to the owners and ask them to sell me the free hold even if they have leased it to the housing people

OuterNet

I am in the middle of a lease extension. When I bought the place 3 years ago, I was made aware by a relative who is a landlord to watch out for places that were less than 82 years left to run on the lease. The reason being that, as those who have been through the process will know, a higher premium, called the marriage value, can be applied where the lease has less than 80 years left to run. Needing 2 years residency to qualify for the right to extend the lease hence 82 years.

There are lots of exceptions and details here, but that was it in a nutshell. I was really surprised that it was so hard to get any information about the length of the lease from sellers (maybe first time buyer being naive) as it is so crucial to the value of the property.

3 years on, I am still going through the process. I´m buying from a housing association, so maybe not as bad so far as friends who are dealing with commercial freeholders and absent individuals which has racked up their costs.

Costs so far on a flat valued at 150,000 are about 6,000 in total.

My valuation 600
My solicitors negotiation 600
Their valuation 650
Their solicitors conveyancing 450
My solicitors conveyancing 600
Their admin fee 250 (refused to pay)
Premium 2750
Searches etc 150

I thought it would cost about 5k so not too bad. Who knows if it will make it more or less saleable in future (as other flats in the street who have not extended may be cheaper) but I feel that i´ve done something to secure the tens of thousands i´ve paid buying the property and who knows if it will pay off. Still to conclude the deal, so we´ll see what the final bills come in as.

:eek:

lynzpower

bowesyb5syncro wrote: »

we have a leasehold house we bought it 5 years ago it was our first house we knew it was leasehold and that the local council held the lease but around the same time the council transferred its housing stock to a housing trust we get a bill for the ground rent £10 pa which we pay but we also get a bill for insurance but i have never paid this as i have my own and my solicitor was aware of this at the time we bought i have phoned the housing trust and they tell me they own my house but im responsible for all repairs etc and i have to pay this insurance i have told them the cover wasnt suitible for what i wanted i have unlimited cover with contents there insurance company told me they couldnt qoute me as they dont do unlimited cover so i asked to buy the freehold and now they say they arent legally obliged to sell it to me as they are a registered charity but they dont own it only lease it from council they have never sent me any policy details i also asked them if they owned my house then they should be responsible for repairs etc but they said they wasnt can i go to the owners and ask them to sell me the free hold even if they have leased it to the housing people

Do you mean that the freeholder wants a contribution to buildings insurance, not the contents insurance ( for your own personal posessions) that you have?

This should all have been made clear in the leasehold documents you recieved when you bought the property.

adh983

pollyhelen wrote: »

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!

Whenever you buy a flat or leasehold property there are a number of questions that your solicitor should automatically send to the solictor of the person you are buyng from, these question typically include the question about the length of time remaining on the lease and other things including past/present subsidence problems or major upcoming works, it usually costs about £150 to get these answered depending on the greed of the owner/managing agent

John_Pierpoint

adh983 wrote: »

Whenever you buy a flat or leasehold property there are a number of questions that your solicitor should automatically send to the solictor of the person you are buyng from, these question typically include the question about the length of time remaining on the lease and other things including past/present subsidence problems or major upcoming works, it usually costs about £150 to get these answered depending on the greed of the owner/managing agent

Didn't that sort of stuff used to be in the HIP?;)

Leasehold_Solutions

OUr top 5 tips might be:

1. The best advice we can and often give is "Read your lease", especially with special attention to the time remaining on the lease.

People often have questions about costs, what they can and can't do, etc and these are often included in the Lease itself. This is less easy if you are in the process of buying a property but the devil can often be in the detail: if you have a dog and the lease of the property you plan to buy says "no pets" you might have a problem, for example.

2. The magic number is 80. If the unexpired term of your lease is coming up to 80 years then extend it sooner rather than later. After this deadline, an extra cost called Marriage Value is included in the lease extension cost.

3. Talk to your neighbours. Whether you want to exercise a Right To Manage because you are not happy how the grounds are being maintained, whether you want to extend the lease or if you would like to use your rights to force the freeholder to sell you the freehold, keep in touch with your neighbours. You can share costs, avoid arguments and confusion and ensure everyone is on-song with your project.

4. Understand that buying a flat comes with issues in the UK imposed by leasehold tenure and you need to understand them. Do your research, get your solicitor to explain (if you want a vetted expert then consider a member of ALEP, the Association of Leasehold Enfranchisement Practitioners) and confirm the paperwork before you even negotiate to buy a leasehold property.

5. Don't under-estimate the emotional energy and time involved in buying your freehold or extending your lease (if you work as a group of flat owners). And do take advice from the experts - mistakes can be costly and the investment in an expert solicitor, valuer or intermediary company can often pay dividends. If you choose to do it yourself (and there is no reason why you should not) accept that you will need around a year of intensive project management to complete the exercise.

helentryingtoberich

I recently bought a flat with 63 years remaining on the lease. I knew that this would affect the resale value, as it was approaching the point where it would not be possible to obtain a mortgage (I was buying for cash), so I told my solicitor that the sale was dependent on the lease being extended. This has to be done by the vendor, but I agreed to cover the costs. The freeholder was willing to extend the lease, despite the fact that the vendor had only owned the flat for 1 year. (You have to own the lease for 2 years before the freeholder is obliged to extend the lease)
My solicitor told me that the cost would be £3500 plus legal fees. He knew this because a partner in his firm represented the freeholder, a large local building firm) This was back in January. However several people decided to extend their leases at the same time, so the builder decided to get a new valuation. Net result, 5 months later, the lease would cost £7875 plus fees, to extend. This meant that the flat was no longer a bargain, so I told my solicitor that I would not be proceeding. The vendor then offered to reduce the agreed sale price to take account of higher lease extension cost.
Moral - always look at extending the lease when you are in a position to walk away. My solicitor reckons that if I had bought the flat, then tried to extend in 2 years time, the cost would have been even higher.
The way it was actually done was the exchange, completion and lease extension all went through on the same day.
Incidentally the legal fees charged by the freeholder were £470. This seems very reasonable compared to some that others have been charged. Possibly the result of being in a small market town where all the solicitors work together.

pineapple1000

So many of these problems can be avoided by serving a Section 42 Notice on the freeholder and then selling the lease with the benefit of the notice.

Firstly you will need to appoint a surveyor - trusted companies can be found on the lease advice website - they will tell you the true range of values you should expect to pay. Then instruct a solicitor who will serve the notice. This needs to be properly assigned (but if its not done properly and the purchasers have to wait two years until to apply again, any increase in premium can be recovered from the solicitor)

Then you can sell with the knowledge of what sort of figures you will be looking at and the buyer will be able to see too, and they can then take it into consideration when deciding to buy or not. The freeholder has to sell and it is unlikley to end up at the LVT unless the parties are REALLY far apart (as both sides pay for their own costs)

Bear in mind someone has to pay for the freeholders REASONABLE valuation fee and legal fees - sometimes cases go to the LVT on costs alone, after the premium has been agreed and generally they seem to crack down hard on solicitors and surveyors who charge extortionate fees - remember you only pay for their valuation up to the service of the notice - so the freeholders surveyors cannot charge the leaseholders for negotiation fees!

Patmaybate

I went throught the process of extending the lease on my maisonette (a block of 4). I wrote to the freeholder in the first instance, asking for a fair price for extending my lease under the Leashold Reform Act 1993. He replied with a figure of £10,250.00, 99 years extension (not including the 60 years I already had). Ground rent at £250, doubling every 20 years (I was currently paying £15 pa); admin fee of £850. I then went on the website of the leasehold advisory service and a returned email and said a ball park figure for extending my lease should be £5500-6800.00. He also told my that the freeholder I was dealing with was a bully boy and not to let him intimidate me - which was OK for him to say. I then wrote back to my freeholder with this information and a selection of options: 1) extension price of £6800, with 125 years and peppercorn rent, plus admin costs; 2) extension price of £5500 with 125 years, ground rent of £125, doubling every 25 years, capped at £1000 or 3) to exercise my right as a qualifying tenant to extend my 90 years, plus outstanding years (60) a total of 154 years and peppercorn rent. All this was rejected by my freeholder and he told me to serve notice on him. This meant I had to get a solicitor,who advised me that this could cost me a lot a money, even though the law was on my side and if I went to Tribunal the lease could end up costing me twice as in legal fees. He wrote to the freeholder setting out my position and giving him the opportunity to deal with the matter sensibly. All was rejected and he told me to serve statutory notice. I could not afford to go down this route. I paid off my solicitor (£350) and laid low for a few months. I then contacted the free holder again and this time we managed a compromise; £8000 for the lease extension, 125 year extension, ground rent of £125. It's not what I wanted or entitled to under the law, but the other way was too expensive, involving solicitors, valuators, and all this would take place in London and I lived up North. All in all, not a happy experience. Although I still had 60 years left on my lease I know that as time goes by the more expensive it is to extend, that is why I decided to do it now.

Patmaybate

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!

I extended the lease on my flat which had 60 years left to run (see separate email). The freeholder wanted to charge me more because he thought I was selling (and desperate). When I said I was not selling, he knocked £2000 off the price. Nice man.