Extend Your Lease guide discussion

eddddy

wdpch wrote: »

Just had my lease valuation done, people downstairs have exactly the same lease terms as me but have just had a drop kerb and parking for 2 cars done in front garden. Am I right in thinking that this will increase the value of their lease?

No - not for a lease extension. As explained in your other thread... https://forums.moneysavingexpert.com/discussion/5477484

The lease extension valuation should be based on the property as it was when the lease was originally granted.

i.e. in this case it would be valued as though it had no dropped kerb and parking spaces.

cazjel

Looking to purchase 1st property. All I can afford are flats with short leases left. I am a cash buyer, does anyone have any advice.
An example is one property with 58 years left, but currently only priced about £10k under reasonable asking price.

Dallybally

Hi. I am not sure if this would be possible, but could you not use all the cash as deposit and get a very small mortgage and buy one with a longer lease? I know many mortgage companies have minimum loan values, but if you went to a few brokers and asked it may be possible to get a mortgage for say 10k, it would only be around £70 a month. You would have an insanely high loan to value so there would be no risk on the lender's side.

Also, you could try your luck as a cash buyer for 10k under value on those with the longer leases. Since the whole eu thing I have noticed some prices dropping, people are nervous, someone who really wants to move may take a low offer from a cash buyer.

laurathree

I live in a flat in West London, that has 67 years left on the lease as of now (68 when we bought). We've owned for about 18months now so I am starting to weigh up our options to extend. Buying the freehold doesn't seem a wise option - I would have liked to own it, but in our block of four maisonettes, one owner is 96 and not bothered, one is a council flat, and the other an elusive buy-to-let landlord. They are mid 1930s maisonettes so maintenance is likely).

Looking at other maisonettes on the same street that have recently sold (it is a street of identical maisonette blocks, 4 per block), ours is valued at about £275k. We have refurbed throughout and done a lot of work on the 2 big private gardens (about twice as big as any others on the street owing to being on a corner plot). I may be being conservative here but given the current market uncertainty, I think that's best.

Not to count our eggs before they've hatched, but we paid £207k for it, so this is already a healthy return (London is a mess). Also, both my partner and I are in better paying and more secure job positions than when we took out our mortgage (not to mention, thanks to #Brexit, interest rates look like dropping, so despite the ridiculously low rates when we first signed the mortgage, there is a reasonable chance they will be even lower come February). Our Mortgage fixed term expires, handily, after two years from purchase, so I am hoping to add the cost of the lease extension to it when we remortgage.

All this is fine - it’s the fiddly bits I am unsure of. So here are my questions:

1. We have a slightly unusual leaseholder arrangement. We pay £250 ground rent each December, and c.£375 in mandated buildings insurance in May. There are no service charges – if repairs are needed, we already have to sort them out ourselves (the freeholder is a last resort apparently, if no agreement can be reached or someone can’t be contacted). Will this have any effect on lease extension costs?
2. The moneysavingexpert calculator estimates a lease extension cost of £23-25k for us (90yrs). Does that seem reasonable?
3. What would the discount be if we tried to negotiate a shorter lease, say 50 years (giving us a length of 116yrs total – more than enough for us and our area, as we intend to sell up within 3-5 years)?
4. How will our better financial/ employment position affect our remortgaging prospects?

Thanks in advance for any advice you can give!

ydt88

GTG wrote: »

First of all your post is very ambiguous but I will give you some facts.

1) You are correct in saying that you have a statutory right to extend your lease for a term of 90 years i.e. in addition to the unexpired years on the lease. You could also negotiate with your landlord a shorter extension i.e. adding enough years to bring it up to 99 or 125 years without going through the statutory procedure. That is not advisable as you will not be protected by the statute if you and the landlord don't agree and then you will have to go through the statutory procedure to get the 90 years any way.

There is a two year qualifying period for a new leaseholder to be eligible to apply for a lease extension. However you can assign your right to apply for a lease extension to the prospective buyer. What is typical in these circumstances is for the seller to discount the purchase price by the value of the lease extension.

2) If you go the statutory route (RECOMMENDED) there are time deadlines for the landlord to reply so do not worry about the landlord not replying. There is also a possibility of negotiating a shorter term as explained above but still having the protection of the statute.

3) If you need to find another buyer and they insist on a lease extension then you have the choice of including it in the sale or discounting the sale price and assign your rights so they can do it. If you do it your solicitor will keep the buyers solicitor up to date in the normal course of the conveyancing.

4) You do not need to approach your landlord, your solicitor will do that if and when necessary through the statutory procedure. Having said all this, I suspect from what you say that the real reason that you're buyer is pulling out has not been established yet. First of all saying it is because the extension will take some time and then telling you that the landlord is telling her it cannot be extended. "Pull the other one it's got bells on" I'd be thinking! However your solicitor should have put your mind at rest by explaining to you your rights with regard to lease extensions and the alternative I have explained above. That's assuming that you are asking him the right questions of course :-)

Wait for your solicitor to get her reply and armed with this knowledge you can go from there

Hope that helps

Just an update on my situation. I managed to somehow find a cash buyer who offered me full asking price, his comments when the lease was discussed was "i dont care" - was advised to take my money and run!
accepted his offer on 19th May - completed on 29th July. I think we just got extremely lucky!

watcherspet

Hi,

I have a lease with 53 years left to run. The freeholder will be auctioning off the freehold in September, and all leaseholders have received letters from a company whose letterhead says they provide 'bespoke financial intelligence'. Whatever that is. :-)

The letter says that the freeholder is happy to grant lease extensions provided they are completed before the date of the auction, and that he is offering a 'reduced rate' valuer's fee of £500 plus VAT.

This 'financial intelligence' company in turn offers to reduce their legal fees for the extension to £800 plus VAT. It suggests that the extensions would be 'expedited' to finish in time.

I have some general questions about this, please:

1) What changes take place when a freehold is sold on - do new freeholders generally look to change/extend leases, or leave them as they are? Can they impose changes on leases, ground rent, etc.?

2) Is it possible that this is just a case of the current freeholder trying to get more money out of the leaseholders before he sells up? (I suspect it is).

3.) In any case, do those fees seem reasonable?

Some background details:

Buying the freehold ourselves doesn't appear to be an option. A neighbour asked if anyone else would join him, but mine was the only response out of 6 flats, as far as I'm aware.

The block is not properly managed. There is no sinking fund or service charge. The last time major work was needed, for fire safety regulations, the freeholder used a local management agency. Previously, he has refused to follow the law on major works, so very little maintenance has been done otherwise.

The common parts are insured, expensively, and the freeholder gets the commission. He has always refused to claim on the insurance for repairs.

The ground rent is £40 a year for the 'old' leases.

I have retired, and my current mortgage has two years left to run. I can't afford to extend it/increase it by tens of thousands, so although extending the lease is the sensible thing to do, I don't know how I could pay for it.

I may get a valuation done, just to see how much it would cost. But I'm not planning on selling any time soon.

watcherspet

A bit more info: the letter says the freeholder's valuers will be the ones giving the discount - there's no suggestion that a leaseholder could use an independent valuer.
There's also no indication whether the process would be statutory or informal.

The freehold goes up for auction 14th September.

At the moment, I'm inclined to ignore the letter and start the process formally with Section 42 once the new freeholder is in place.
But I'm open to any advice or suggestions. :-)

AJLarter

Hello, I'm just about to start the process to extend my lease, and working with a mortgage adviser to borrow some more money on my mortgage to do so - is it better to contact the freeholder to ask for an estimate for the extension or to get a lawyer/surveyor to start the negotiations on my behalf? Grateful for any advice!

eddddy

AJLarter wrote: »

Hello, I'm just about to start the process to extend my lease, and working with a mortgage adviser to borrow some more money on my mortgage to do so - is it better to contact the freeholder to ask for an estimate for the extension or to get a lawyer/surveyor to start the negotiations on my behalf? Grateful for any advice!

There's no harm in asking the freeholder for a quote.

But check the terms carefully - don't just look at the price. Quite a few people seem to get tricked into getting 'bad' lease extensions, because they seem cheap.

A statutory lease extension would add 90 years to the term, and take the ground rent down to zero (a peppercorn). Those would be good terms to aim for.

AJLarter

hello, the guide currently says that a leaseholder is not responsible for paying the freeholder's legal costs, whereas looking at legal advice on a number of solicitor's guides this seems to be incorrect and in fact they do have to pay costs - is it possible to get clarity on this please?
thanks!