Leasehold maisonette with less than 68 years - stay clear?

smudge2013

I'm a first time buyer and just seen a perfect property. Its a leasehold maisonette, but with just one issue. The lease has only 68 years to run. After doing some research, it seems anything less than 80 year leases are expensive to renew. Also banks are much less willing to lend to properties on leases with that 'little' time left on them. Bearing in mind this property does not even have 70 years on, I'm concerned the costs to renew it would be huge. For the record its listed price is 136k.

I guess my two main questions are:
Is this such a significant issue that the property is worth not going for?
If I were to proceed, how do I work out what I should deduct from the asking price? I was thinking 10k off it, but thats really me just pulling a number out of the air.

Any advice would be appreciated! Thanks, James.

BitterAndTwisted

The current owners, if they are serious about selling, should have gone through the lease-extension process themselves. The shorter a lease, the more expensive it will be to extend. if you have a choice, I think you should consider another property. I think you will find it very, very difficult indeed, if not impossible, to find a lender who will give you a mortgage on this one.

kingstreet

I recently conducted something similar for a client whose purchase had 56 years left to run. By our calculations, houses which were being sold with the freehold were commanding approximately £40k more than the leasehold equivalent.

There were still approximately twenty lenders left available to us, as the minimum appears to be mortgage term, plus thirty years. So a 25 year mortgage would just fit a 55 year lease.

They purchased the property with a mortgage from Abbey and will look at purchasing the freehold in two years for anything upto £15k.

In your case, do properties which have had the lease extended fetch a higher price?

Doozergirl

The simple answer is to offer a price that includes a fresh lease and get the vendors to extend it! If they don't have the cash, it doesn't matter because it's your funds upon completion that can pay for it. You don't have to worry about anything except waiting to receive your new house with a shiny new lease.

As kingstreet said, there are lenders, it isn't the end of the world. If you do buy without the extension then you would want the vendors to obtain a fresh quote from the freeholder for a lease extension so that you can budget accordingly, remembering that there are two sets of legal fees to cover on top of that. But once they've obtained that price, they may as well extend the lease. You don't have to wait two years to extend the lease either - you can ask and most freeholders will give, it's just that after two years you can force any reluctant LL to give you a 90 year extension.

It's not as scary as people make out. All problems are solvable and you might get a deal.

smudge2013

Thanks for the replies everyone.

So I guess the best solution is to say to the vendors that I want to make an offer on the house, but as part of the sale they need to renew the lease to 99 years (at their expense). At which point they can either accept and work out how they finance it, or tell me to go jump.

If they agree to it, is it fairly clear how to set it out as a term of the sale in all the contracts and legal papers. I want the agreement to be water tight.

Thanks.

DVardysShadow

Offer '£X subject to lease extension to 99 years'. Inform your solicitor in writing of the deal. When signing the contract, ask your solicitor to explain how the lease extension is assured.

InkZ

Yes, get it extended before you buy.

Don't forget if it has 68 years on it now, and you are there for five years it's going to be even harder to sell. I don't think I'd buy anything with any less than 75 years on it as an absolute minimum.

If you get it extended before you buy, then you know you won't have any nasty suprises further down the line.

Also, don't forget, there are always other properties, so no point buying one that will be harder to sell in the future.

kingstreet

So the vendor increases the lease and hikes the price as the property becomes more attractive?

It really would help if we knew the differential in pricing between those with extended leases and those without.

I'm not disagreeing with the other views, just think it might be an opportunity. If you toss the problem at the vendor, you might miss out.

Richard_Webster

In these sorts of cases the estate agents generally say that it will be straightforward and won't cost much to get the lease extended. The freeholder will be portrayed as very reasonable....

Buyer's ploy then is to say that if that is the case then why doesn't the seller organise the extension and they can do a deal over the price because if it won't cost much then the buyer won't have to pay much more for an extended lease, will he?.

If seller won't do that, then buyer can reasonably say that perhaps the reason is that seller suspects that freeholder will want a very high figure to do this and then the buyer threatens to walk away/ask for a further reduction....

You can check the ball park figure by going to lease-advice.org. They have a calculator accessible from the bottom of their home page. If you wait two years the figure will go up relative opt the market value because the lease has shortened.

smudge2013

Just to update you guys on the end resolution. The seller agreed to extend the lease to 99 years as part of the sale and the extension was completed at exchange.

Thanks for all the advice.