Extend Your Lease guide discussion

VodkaSorbet

SKPatel wrote: »

I would be inclined to follow your surveyor's advice. It is rare for leases with 100 years remaining to be extended particularly if there is no value added to the property.

You may find that investing your money elsewhere may give a better return for the moment

I'm not looking for a return on my money as such, I'm just looking to avoid inconvenience/expense in 20yrs or so.

I would guess its rare for leases with 100 years remaining to be extended cos they don't need to be for a sale. It's probably quite rare for people with those leases to have plans to sell in 25 yrs time though (maybe I'm wrong to have that sort of plan!).

Thanks for your input, some more thought to be had!

VodkaSorbet

propertyman wrote: »

I'd tend to say to do it. Though it does not add value per se to the flat, its the loss of value after 20 to 30 years, and the inconvenience of doing it at that time that can be eliminated early on and for along time to come.
Given the low value I might even suggest you talk to the freeholder and agree terms between you as if they get a cheque for £1000 and you pay their fees, the overall costs might be nearer £k than £5K.

I have even negotiated reverse premiums where the old pounds shilling and pence rents are replaced with modern ground rents which the leaseholder pays one or two years before moving and selling a lease with an extension up to 125 years. These rents are valuable to the landlord and in those cases as said they paid the lessee to extend!

I talked to the freeholder before I started but there is no shortcutting with them - they are the local council and they told me to appoint a solicitor. They also said they have only ever (?!) done one lease extension and that came to £2500 plus the leaseholder's solicitor costs, so that ties in with the surveyor's estimate.

buglawton

I've seen one or two flats for sale with something like a 990 year lease. Any ides why these might exist?

SKPatel

Hello Buglawton,

I suspect the tenants have grouped togther and purchased the freehold of the these flats and then granted themselves 999 years leases.

These longer leases are usual where the tenants are also the freeholders.

propertyman

buglawton wrote: »

I've seen one or two flats for sale with something like a 990 year lease. Any ides why these might exist?

Leases go in fashion- 1970's 80'2 were often 99 years and later in the 80's and 90's 999 year leases and peppercorn rents were common as freeholds were regarded as worthless. It is only the resurrection of ground rents in the 2000's as part of the housing boom and changes in practice that 125 years has become the standard.

As SKP says where freehold are bought it is a common step to grant 999 year leases, though its not the best solution.

chb243

Hi All, thank you in advance for your insight.

I want to put an offer in on a property with a leasehold of 72 years in west London. My question is (and I'm sure a solicitor will be best placed to answer this, but your ideas are very welcome:)), does this sound like a good/bad idea to you?

Other circumstances:
1. The flat only has 72 years left on the lease
2. There are tenants in the flat who cannot be given notice until February 2015 (I'm okay with this)
3. In 2 years time, when I'll be able to buy the leasehold (apparently one must wait 2 years for this right) I am confident I'll be able to afford the leasehold extension. In contrast, currently with stamp duty what it is - I wouldn't be able to renew the leasehold today even if it were an option.

Many thanks for your opinions. Having read many forums and websites, I'm still unsure about whether or not 72 years is sufficient.

zarf2007

propertyman wrote: »

Leases go in fashion- 1970's 80'2 were often 99 years and later in the 80's and 90's 999 year leases and peppercorn rents were common as freeholds were regarded as worthless. It is only the resurrection of ground rents in the 2000's as part of the housing boom and changes in practice that 125 years has become the standard.

As SKP says where freehold are bought it is a common step to grant 999 year leases, though its not the best solution.

Just curious, but if you did own a share of the freehold and all owners decided to grant a 999 year lease, what could be a downside of doing so?

propertyman

zarf2007 wrote: »

Just curious, but if you did own a share of the freehold and all owners decided to grant a 999 year lease, what could be a downside of doing so?

Well you wont own a share of the freehold, either your company does or you jointly own the freehold.

Very often leases have service charge provisions that don't allow recovery of the freeholders costs,sometime its some aspects of the service charges,but usually its operating expenses.

Having long leases of 999 lease its can therefore be useful to maintain a gerund rent to pay for that.

it is also useful to retain GR as it creates a value to the freehold that can be useful for short term emergency loans ( where the SC or articles do not allow one off demands) or even a future sale to raise capital, with management retained under right to manage.

You can resolve year to year to waive it until then or accumulate it and use it as a reserve fund,or a cushion against unforeseen expenses.

propertyman

chb243 wrote: »

Hi All, thank you in advance for your insight.

I want to put an offer in on a property with a leasehold of 72 years in west London. My question is (and I'm sure a solicitor will be best placed to answer this, but your ideas are very welcome:)), does this sound like a good/bad idea to you?

Other circumstances:
1. The flat only has 72 years left on the lease
2. There are tenants in the flat who cannot be given notice until February 2015 (I'm okay with this)
3. In 2 years time, when I'll be able to buy the leasehold (apparently one must wait 2 years for this right) I am confident I'll be able to afford the leasehold extension. In contrast, currently with stamp duty what it is - I wouldn't be able to renew the leasehold today even if it were an option.

Many thanks for your opinions. Having read many forums and websites, I'm still unsure about whether or not 72 years is sufficient.

72 years is sufficient for most purposes but as each year passes to gets more and more expensive to extend as the average buyer will not touch it,nor will the lender.

When buying the flat you are buying the leasehold, all you can do is extend that lease.

Unless it is house the freehold of the block can only be bought by a majority of the leaseholders.

SKPatel

Hello!

There are a few points to note before you proceed. The first is that your mortgage lender will have to agree to the 72 year lease in order for you to obtain a mortgage so you may wish to consider this first.

The second point is that, provided you plan on owning the property for a few years, you will more than likely struggle to sell the property without extending the lease. Therefore it may be worth researching the likely costs and process of a lease extension. Although you can't be sure what the cost will be in 2 years time, having an idea of what it may cost now will give you a starting point and something to budget towards albeit the costs will increase.

Finally, it may be worth asking your conveyancing solicitor to raise an enquiry with the vendors as to whether the landlord is willing to grant a lease extension after you have purchcased the property. If the landlord is open to negotiation, you may be able to agree a lease extension without having to wait 2 years.

Good Luck!

chb243 wrote: »

Hi All, thank you in advance for your insight.

I want to put an offer in on a property with a leasehold of 72 years in west London. My question is (and I'm sure a solicitor will be best placed to answer this, but your ideas are very welcome:)), does this sound like a good/bad idea to you?

Other circumstances:
1. The flat only has 72 years left on the lease
2. There are tenants in the flat who cannot be given notice until February 2015 (I'm okay with this)
3. In 2 years time, when I'll be able to buy the leasehold (apparently one must wait 2 years for this right) I am confident I'll be able to afford the leasehold extension. In contrast, currently with stamp duty what it is - I wouldn't be able to renew the leasehold today even if it were an option.

Many thanks for your opinions. Having read many forums and websites, I'm still unsure about whether or not 72 years is sufficient.