Dilemma - Sellers now not increasing lease and not reducing asking price! Please help

bernieuk

The dilemma is this.....

My Son is buying his first flat at the price of £142,500. It has an 81 year lease. The agreement was that if the seller increases the lease by another 99 years - a total of 180 years obviously - my Son would pay the full asking price. This was agreed to verbally.

With probably just a few weeks to go before the whole thing is finalised the sellers are now not going to increase the lease at all. Furthermore they are not going to budge on the price either - they still want to sell it at £142,500.

My guess is that they had no intention of increasing the lease anyway. They are probably just the lease holders and not the lease owners.

Now, considering my Son has spent over a 1000 quid on fees, surveys etc he is not too happy of course. He is seriously considering pulling out of the deal all together.

Originally he was going to buy the flat & sell it in a few years in the hope of buying somewhere bigger and better. If he bought it with an 81 year lease I would assume it would sell for more with an extra 99 years. If he was to negotiate and ask them to reduce the asking price what would be a reasonable amount to expect? He is contemplating saying reduce the asking price by 5000 or no deal!

Should my Son put this down to experience and tell the sellers to shove it?

I have to admit to not knowing too much about the property game and neither does my "First Time Buyer" Son.

Any help or advice would be certainly appreciated.

lynzpower

i dont know too much about extending leases to be honest, but if it was me I would be tending towards what else dsont I trust this venodr to do, wht else are they going to let me down on... Id probably, very reluctantly, consider pulling out.

dmg24

The value of an increase in the length of lease will vary on each property, however an increase of 99 years is substantial and would have a significant effect on the price.

In terms of what to offer to reflect this change of heart, I would contact the Leasehold Advisory Service (https://www.lease-advice.org), who will be able to estimate the cost of the additional 99 year lease. This will give you some indication of how much to lower the offer.

If the sellers are unwilling to back down on the price, I would walk away. I imagine they have looked into the cost of increasing the length of the lease, realised how much it is going to be, and this is why they have changed their minds.

Also, it may be worth asking the estate agent, or your solicitor, to ask the seller if they have been given an indication of how much the extended lease would actually cost. If they still want to sell then maybe they will be willing to give this information. It is also relevant in that, if you still decide to go ahead with the purchase, you are likely to need to extend it when you try to resell (a lease of less than 80 years is very unattractive to a potential purchaser).

It's a nightmare when sellers start playing games like this, rest assured not all sellers will be as difficult!

EdInvestor

If he bought it with an 81 year lease I would assume it would sell for more with an extra 99 years.

Sometimes this is so but not always. It depends on the area, type of property, state of the market at the time etc..

What would bother me about this is not so much the lease issue but the fact the vendors have lied.

Personally I always walk away from any deal where people do this.I never do business with people who gazump, gazunder, or generally can't be trusted.Nor do I accet any last minute reduced offers on the basis of surveys.It's just not worth it, you always lose out in the end.

[I always tell the estate agents that I take a hard line on these issues, so they won't waste their time selling me any property owned by flaky vendors, or vice versa. I find the agents always appreciate this approach.]

You may well find that if you take a hard line the estate agent will pull your vendor into line.

nrsql

I think you should allow 5k-10k to extend the lease but will depend on a number of factors including the interpretation of the law at the time.
When I did it on one of my flats it took over a year so it wouldn't have been something the sellers could commit to.
In future make sure agreements like this are put in writing.

Doozergirl

Your vendor will be a leaseholder, not a freeholder (or leaseowner as you say) and that is why they have to extend the lease. It's unlikely that anyone with share of freehold would have to extend their lease at this point in history.

It's true that lease extensions can take quite a long time, even if you're told by a management company that it will take a matter of weeks. I'm also learning over the past few days, that freeholders have a habit of wildly overvaluing the lease extension.

Whether your son pulls out is a matter for him, but at 81 years, the flat is entirely capable of selling at full market value as all mortgage lenders are happy with that length of lease. As vendor, there's no way I'd be reducing price. However, I wouldn't have even offered to extend the lease.

dmg24

I think you should allow 5k-10k to extend the lease but will depend on a number of factors including the interpretation of the law at the time.

I would not rely on any figure based on what someone else has been quoted. The figure will be unique to the property, and whilst it could be in the above bracket, it could also be twice that amount.

mi-key

I would be wary - I've heard that a lot of lenders wont lend on leases of less than 75 years - OK, your son can borrow now as its at 81 years, but what if he wants to sell in 6 or 7 years time ? could be that potential buyers wont be able to get a mortgage on it, making it worth a lot less.

So, he'd have to pay to extend the lease himself anyway once he had bought the flat.

As his offer of £142,500 was dependent on the flat having a 180 year lease, it is now worth £142,500 minus whatever the lease extension would cost.

Personally I'd find out what it will cost to extend it, then make a final offer to the sellers deducting this amount - if they dont go for it, walk away.

Doozergirl

mi-key wrote:

As his offer of £142,500 was dependent on the flat having a 180 year lease, it is now worth £142,500 minus whatever the lease extension would cost.

Only to the OPs son, unfortunately, and not necessarily to other buyers, which doesn't put him in the best bargaining position with the vendor.

It's not 75 years where some mortgage companies get twitchy; it's more like 70 and the number that won't lend doesn't really affect the abililty to obtain a mortgage if someone is using a broker. Many lenders just ask for 25 or 35 years left after the term of the mortgage.

mi-key

Sorry, should have made that clearer - the flat is worth £142,500 minus the cost of the lease to him ( is what I meant ).

And as its him who is spending the money, then he has to consider if spending the extra is worth it, or if its throwing good money after bad in carrying on with it.

I think some sellers do think that buyers, after spending money on the survey etc..., won't pull out, and use this as a lever. Personally, I wouldnt care, if spending £140K+ on something, losing £1000 or so if I wasnt happy with the situation wouldnt bother me and I'd look elsewhere.