Should I Extend The 74 Year Lease Remaining On My Flat?

2am

I am planning to sell my 25 year old leasehold flat, perhaps for about £180000. It has 74 years remaining on the original 99 year lease. Is it worth paying to extend the lease? For what term? How much is it likely to cost? Is costly professional assistance required or is it a DIY job? Guidance please.

prutter

I would say it's not worth extending the lease.

My understanding with leasehold properties is that most lenders require at least 30 years remaining following completion of the term of the loan.
So, lets say your new buyers want a 30 year mortgage, they'll still be 44 years left after then, so they'd have little problem getting a mortgage.

IMO not worth the time, hassle or expense in your situation.

Hope this helps....

Doozergirl

Some people will buy with that length of lease, others won't, others will want the appropriate discount on the price of the flat.

If you're in London then I'd think you'd be more likely to find someone without a problem. I have sold a flat with 73 years previously and told the buyers I'd already discounted the flat by the cost of the lease extension

You can legally extend the lease by 90 years after having owned the property for two years. On top of the lease extension itself, you have to pay your solicitor and the freeholder's legal fees. If you have a managing agent, they'll add a few hundred quid for their pocket too :mad:

I think what you must do at the very least is obtain a valuation from your freeholder. I had to pay £299 + VAT plus some random amount to the managing agent so that they would pass the message on to the freeholder :wall: It also took about 2 months of constantly chasing just to get a price.

Richard_Webster

A comment on this quote first:

My understanding with leasehold properties is that most lenders require at least 30 years remaining following completion of the term of the loan.
So, lets say your new buyers want a 30 year mortgage, they'll still be 44 years left after then, so they'd have little problem getting a mortgage.

That's oversimplifying a bit but broadly true for major lenders. It isn't really the point. Have to go through a bit of a process to make my point but please read on.

OK so say 30 year mortgage + 30 years left is acceptable to lender this would mean it would accept just over 60 years. So if someone buys a lease with 65 years left and wants to sell it 5 years later he is going to find himself with a problem - so he tries to get the price discounted to reflect this. Somebody buying a 70 year lease might think that at 65 years his buyer will realise what will happen 5 years after that, so at 70 years he asks for a discount to reflect the likely discount he may have to give and so on.

Of course as Doozergirl says in the market it doesn't really work like that. It is usually difficult to find two otherwise identical flats (especially conversions) where the only difference is the length of lease. Usually there are other factors such as condition, double glazing or not, central heating or not, parking or not, etc that make a difference in the price and it is quite easy for a seller to say that the lease length is reflected in the price.

I tell buyer clients to look for a longer lease because the chances are that the shorter leases won't be much cheaper (because somebody will buy them without realising the trap they are falling into in the medium/long term). Unusually I had a case recently where two almost identical 1970s maisonettes were the same price but through some quirk one had about 75 years left, the other about 970 years left - both the same price. Client started with the first one but when I pointed the issue out he dropped it and bought the longer lease! That is rare.

So from a seller's point of view it depends on how long you want to wait. If your buyer doesn't really spot the point (or his solicitors don't explain it to him) then you get away with it. If he does and wants a reduction you have to consider whether by refusing this you will get another buyer who won't ask for a reduction. There are also delay issues that you have to weigh up if you refuse a reduction and have to start again.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.