FTB Questions about leaseholds

Mrs_Y

Hi all,

I am a FTB and in the process of negotiating an offer on a flat.

The flat is a leasehold property and the lease has 99 years left. Is this average?

I understand that you need to live in the property for 2 years before you can apply to extend the lease?

If I planned to live in the property for a maximum of 10 years, when I come to selling the property, would 89 years left on the lease be okay?

I know that the longer the lease, the more valuable the property is, so would it be advisable to apply to extend the lease after 2 years?

Also with the lease, can you only apply to extend it by 99 years at a time? So if I were to apply to extend the lease in 2 years time 97 years + 99 years = 196 years left on the lease.

Sorry if my questions seem a bit dim, but this is all new to me

Any tips and advice would be much appreciated.

Richard_Webster

See comments in green below:

The flat is a leasehold property and the lease has 99 years left. Is this average? Yes, that's fine. Most new leases are for 125 years - but that's just a fashion thing - no law about it.

I understand that you need to live in the property for 2 years before you can apply to extend the lease? You have no right to have an extension until you have owned for 2 yaers but there is nothing to stop you asking, but as explained below, there's no point in doing so at the moment.

If I planned to live in the property for a maximum of 10 years, when I come to selling the property, would 89 years left on the lease be okay?
Yes

I know that the longer the lease, the more valuable the property is, so would it be advisable to apply to extend the lease after 2 years?
No, once the lease has over about mid80s of years its value doesn't go up very much, if anything. In the real world people don't actually pay any more for a 167 year lease than a 97 year lease.

A few yaers ago in my area there were two almost identical 1970s maisonettes on the market both the same asking price with different agents - one with a74 year lease, the other 970 years. I advised my client to buy the one with a longer lease! However this just illustrates the way a lot of estate agents look at this issue.

Also with the lease, can you only apply to extend it by 99 years at a time? So if I were to apply to extend the lease in 2 years time 97 years + 99 years = 196 years left on the lease.
You can ask for any extension you like but the statutory provision is that you can require a 90 year extension (97+90=187) at a nil ground rent. Landlords tend to try to get you to agree less than the 90 years and/or to put the ground rent up so it is very unlikely that an outside landlord would agree another 99 yaers.

It costs to get an extension - first a premium to the landlord - a four figure sum usually for a lease in the 80s/90s of years - and then even if you can reach agreement without having to go through the Leasehold Valuation Tribunal you have to pay your own and the landlord's legal and surveyor's costs and these can easily be £1,000-£1,500. If you have to go through the LVT for an extension the legal and surveyor's costs would be double that and some.

Property prices are not scientifically calculated so that you can show that your flat with a 187 year lease is worth £X more than one with a 97 year lease. It might be, but I think it is very likely that the cost of the extension could be more than any increase in value - new kitchen units could well be worth more! A lot of people make offers on flats without really knowing how long the lease is. They often offer on short leased flats and then the transaction falls through when their solicitor explains the issue to them. If the lease isn't too short then they don't worry about it and so often won't care if it is say 87 or 177 years.

Mrs_Y

Hi Richard,

Thank you so much for answering all of my questions, I really appreciate it

I'm not feeling like I'm waking into the great unknown as much now!

I will definitely be showing this to Mr_Y as well, I think it will give him some peace of mind too.

I know that when we appoint solicitors, they will go through the lease, but are there any questions that I should ask, or any things that I should look out for?

I want to be as well informed about the whole thing as possible.

Many thanks,

Mrs_Y

Richard_Webster

You will want to know who is responsible for management and maintenance of the structure of the building and its insurance. Usually with any size of block this is the landlord/freeholder who may appoint a professional managing agent actually to arrange all this and collect any service charge. Your solicitors will want to see that any anticipated future works have been allowed for and money is being put aside for them so that you do not get dramatic increases in service charge when some major works need to be done.

It is also worth having a survey because then the surveyor will flag up anything he see is likely to need to doing and then your solicitor can ask if this work is planned and financial provision made for it.

Sometimes in very small blocks - typically 2 flat buildings - each flat owner is responsible for maintaining and insuring his part of the building.