Inheriting a house with very short leasehold

lowlyp

My Mother-In Law is 82 and owns her house which is currently worth around £70,000 - she has made a will and asked my husband to be the executor and she has left the house to my husband, his sister and his brother to be shared equally between them. The problem is that there is only about 10 years left on the leasehold and she nor any of the family are in a position to purchase the freehold - about 10 years ago when she enquired about purchasing it the Company that owned it required £26,000 to purchase it and although we wrote on her behalf and tried to offer less they would not budge on the price.
I'm worried that rather than being the gift that she wants it to be it will become a huge problem. None of the family are in a position to borrow any money and none of us have savings or any way of raising the money required.
If anyone can give some advice we would be very grateful!!

ILW

Once the lease comes to an end, the ownership of the property reverts to the freeholders. Any cost of extending the lease will reflect this.

BitterAndTwisted

If they wanted £26k ten years ago the price-tag since then has probably shot up astronomically. Look at it as if it were a rental on a long lease. When your MIL passes on the three will have a property which they could let out until it passes back to the freeholder. God willing, your MIL doesn't live longer than another ten years or you'll all need to help find her somewhere else to live in her dotage.

TrickyDicky101

When you say it is worth £70k I take it you mean if it was freehold it would be worth £70k? At the moment, with only 10 years left on the lease, you essentially just have a prepayment of 10 years' worth of rent. It will be worth far, far less than £70k. Depending on location I guess it could just be a few thousand.

GDB2222

There can be a claim for dilapidations from the freeholder at the end of the ten years. So, it could be a liability rather than an asset if MIL lives say another 8 years, ie when the remaining lease term is short and the dilapidations payment is in sight. I suggest very strongly that the executors take legal advice when she dies. In the meantime, do not get your hopes up about the inheritance, I am afraid. Even if MIL died now, the house would only be worth a fairly small fraction of the £70k.

propertyman

Sorry to disagree but at the end of the lease the occupant can remain as an assured tenant. The landlord only has very limited grounds to take possession and only under a court order. They must take specific steps to do so.

In most cases the ability to sell the house is worth the landlord offering a substantial sum for the tenant to vacate.

As your landlord is sitting on a very valuable asset in 10 years, IF they can get possession which is by no means certain, you might get advice on how much they would pay you to "leave early", and if that would make her comfortable elsewhere.

The beneficiaries will have not have a right to the tenancy unless they are in residence, so this might be the best way to realise your inheritance and safeguard your MIL retirement, especially if her prospects are good.

You might also look at equity release schemes, or to exercise her right to buy and sell on the benefit to a new freeholder ( who pays for the extension) in return for a cash sum and a tenancy for life.

You need specific advice for your MIL on this, there might be chance to make her more comfortable, as at 92 she will be a tenant anyway, and the estate will then have no asset to be passed on.

DVardysShadow

GDB2222 wrote: »

I suggest very strongly that the executors take legal advice when she dies. In the meantime, do not get your hopes up about the inheritance, I am afraid. Even if MIL died now, the house would only be worth a fairly small fraction of the £70k.

I agree. And if the legal advice is not to keep the estate intact until the lease is terminated or surrendered or whatever, I would be surprised. If this property is inherited out of the estate, it could become a liability. But if it is kept in the estate, then nothing should be distributed from the estate until the property is resolved - because this money will be required to pay off whatever the estate finally owes.

propertyman

DVardysShadow wrote: »

I agree. And if the legal advice is not to keep the estate intact until the lease is terminated or surrendered or whatever, I would be surprised. If this property is inherited out of the estate, it could become a liability. But if it is kept in the estate, then nothing should be distributed from the estate until the property is resolved - because this money will be required to pay off whatever the estate finally owes.

Well I disagree, and if you reread my post you will understand that there is a significant value, even in circumstances where they cannot afford to avail themselves of it directly.

If she were to pass soon a purchaser will ask the estate to exercise the right to buy and agree a split of the gain in value. If her prospects are good, and she becomes an assured tenant, then perhaps it is best to do so now, and create a cash sum.

If they leave it until she passes there may be nothing to inherit....
just hand the keys back.

The time to take advice is now.

DVardysShadow

propertyman wrote: »

Well I disagree, and if you reread my post you will understand that there is a significant value, even in circumstances where they cannot afford to avail themselves of it directly.
If she were to pass soon a purchaser will ask the estate to exercise the right to buy and agree a split of the gain in value. If her prospects are good, and she becomes an assured tenant, then perhaps it is best to do so now, and create a cash sum.

If they leave it until she passes there may be nothing to inherit....
just hand the keys back.

The time to take advice is now.

Thanks for disagreeing. But nothing of what you have said actually makes me think any different. What remains to be inherited is on a bad day potentially a toxic debt. On a good day, your approach may yield some value. And it would be better done sooner rather than later.

Given the risks, the property should be dealt with within the estate until the value is resolved. If there is an overall loss, well, the debt dies with the estate. If there is a gain, that should be inherited once it is realised. There is no point inheriting something out of the estate only to find that it is really a debt.

GDB2222

I don't doubt you Propertyman, but do you have any references to what you said? It's a point of interest to me, as I have a flat with a fairly short lease.