Buying a short lease flat - seller wants to use money from sale to extend lease??

Eve1

Hello all,

Im a first time poster and was wondering if you could help. I want to purchase a flat which has 65 years left on the lease. Its a reasonable price but the seller says the lease cost will be close to £20K and wants to use the money from the sale to extend the lease - which seems the wrong order somehow....surely they should be extending the lease first before i start buying procedures?

Pls could anyone who may have experience of this, advise on this - is it worth avoiding - i obviously prefer the path of least resistence!

Many thanks all,

Eve

poppysarah

They need to do it before they sell it. You'd have to wait 2 years I think before you could buy it. AND you might not get a mortgage unless it's been done.

Richard_Webster

If the seller has managed to negotiate terms for the lease extension then he can organise it so that he has the extension already in place ready to go when he pays the money which he gets from you.

If the landlord's solicitors are prepared to co-operate it is perfectly possible to do it "back-to back". The seller contracts to transfer the lease plus extension so if he can't deliver the extension he is in breach.

There is an old post of mine as to how a seller could achieve this at: http://www.houseweb.com/forum/showthread.php?t=398

Eve1

Thank you both - Richard, is there a risk that i buy and then the seller doesnt proceed with the lease extension. Will i then be stuck? Im worried we will be stuck with a short lease flat.

Doozergirl

Eve1 wrote: »

Thank you both - Richard, is there a risk that i buy and then the seller doesnt proceed with the lease extension. Will i then be stuck? Im worried we will be stuck with a short lease flat.

No. Your contract will include the lease extension so if they don't extend the lease, they would be in breach of contract and you would be entitled to not only your deposit back, but recompense for all your expenditure and compensation.

It's not unusual at all. Not many people have enough money to be lying around to pay off a lease extension on a property with a short lease. When you buy a lease extension like that, the process is not dis-similar to buying a property in a chain, everything happens simultaneously. The contracts are clear on what is expected.

Poppysarah's advice is a weird mash of slightly correct information dished out incorrectly

Richard_Webster

Thank you both - Richard, is there a risk that i buy and then the seller doesnt proceed with the lease extension. Will i then be stuck? Im worried we will be stuck with a short lease flat.

Doozergirl has given you the answer.

Eve1

Hello all,

Just a continuing post here - we have now put in an offer on a property where they are in the process of extending the lease - we have had to pay no money towards it and they have said that its ongoing and will be extended. If accepted - we would want to start the ball rolling with solicitors etc but my inkling is to hold back till the lease is extended. If we went ahead and paid fees to the solicitor - would these count as expenses that could be reclaimed?

ILW

Eve1 wrote: »

Hello all,

Just a continuing post here - we have now put in an offer on a property where they are in the process of extending the lease - we have had to pay no money towards it and they have said that its ongoing and will be extended. If accepted - we would want to start the ball rolling with solicitors etc but my inkling is to hold back till the lease is extended. If we went ahead and paid fees to the solicitor - would these count as expenses that could be reclaimed?

There is no contract with the seller until exchange, so it is unlikely you could claim anything.

Eve1

Hi ILW

I thought that if they agreed to extend the lease - the property would be bought with the understanding that it would be with a long lease - surely they would be in breach of contract if they in turn didnt end up getting it extended?

Doozergirl

Just typed out a big reply and lost it.

You can't reclaim anything unless you have exchanged contracts and they fail to complete within the agreed terms of the contract. It's nothing special about lease extensions.

The thing with buying property is that you have to just go in for it. You need the mortgage company to survey for potential problems, you need your solicitor to convey for certain problems - you can't move in a certain order to minimise the risks you take when you start your due diligence as you don't know if when you've paid for a full survey and it's fine, that you then pay for searches and they come back with a problem iyswim. You just need to do all of it. So you could wait 2 months or so for the lease extension and then find your survey comes back with a problem later on down the line and all you've done is waste time.

I don't personally see any additional risks in moving ahead whilst the lease is being administered. In the list of things that might go wrong, it isn't high on my list at all. It's incredibly positive that the vendor knows already what their issues are and is dealing with them - lots of people don't and the problem of the short lease only arises once the buyer's solicitor gets on board! Your vendor is switched on, has taken relevant advice and seems motivated to move.

You may not be familiar with the scenario but that doesn't mean that it's unusual to property professionals It's perfectly normal to complete on a lease extension at the same time as completing on the purchase of the actual flat. It's solicitor's dealing with all of it, not the vendor themselves - they don't just hand over money and keep their fingers crossed, it is a proper legal transaction. The solicitor has a duty of care to ensure it all happens at the right time!

I've sold a flat myself where the lease extension went through with the purchase. We could have paid out the cash ourselves but there was little point when the extension wasn't to benefit us personally. We negotiated a price with the freeholder, passed it all over to the solicitors, found a buyer, everything went through as normal. I didn't have to do anything special except the initial groundwork to agree a price.

Don't panic about it! I cannot see any benefit to waiting. If they've promised a lease extension and they've negotiated the price already then the hard stuff is done.

Eve1

Thanks Doozergirl - what a clear and friendly response!!!! You have certainly helped put my mind at rest - many thanks!