Buying a leasehold property

varghesejim

We would like to buy a flat near to my workplace in Leatherhead. There is a two bed flat available in a nearby place(Cobham) but it has only 77 years left on the lease. Should we be worried?

hazyjo

Are you buying with a mortgage? I would be looking for the vendor to extend before/as part of the sale - at their expense.

Jx

tom9980

varghesejim wrote: »

We would like to buy a house near to my workplace in Leatherhead. There is a two bed flat available in a nearby place(Cobham) but it has only 77 years left on the lease. Should we be worried?

You talk about a house then a flat? your post is confusing. please explain the situation because it is not clear.

cattie

Unless the sale price is very cheap to reflect the cost of a lease renewal or extension, then you need to be pretty wary of leases that have less than 80yrs left to run.

This is because leases with less than 80yrs remaining are far more costly to renew than those with 80+ remaining.

Also, there are some lenders who are not willing to grant mortgages on properties with less than 70yrs remaining, so this can limit resale opportunities if the lease isn't extended/renewed.

As hazyjo mentions, the best option is for the present owner to extend the lease before the sale goes ahead and meets the cost of this themselves.

With leaseholds you only have the legal right to extend once you've owned the property for 2yrs. Of course a freeholder may well agree to an extension or renewal before this qualifying period is up, but a crafty freeholder could refuse to allow a new owner to renew early, just so it would cost a bit more to extend the diminishing lease.

See here for approx costs of renewal http://www.lease-advice.org/calculator/ and for general advice on buying and owning leasehold property.

varghesejim

tom9980 wrote: »

You talk about a house then a flat? your post is confusing. please explain the situation because it is not clear.

Edited the OP

varghesejim

cattie wrote: »

Of course a freeholder may well agree to an extension or renewal before this qualifying period is up, but a crafty freeholder could refuse to allow a new owner to renew early, just so it would cost a bit more to extend the diminishing lease.

Thank you. We don't mind waiting for two years to qualify. I understand the freeholder has to extend the lease on our request after the qualifying period. Am I correct in presuming the only problem with the diminishing lease is, for two years we might find it difficult to sell the property?

Also I checked the calculator(thanks again!). It will take 9000-10000 GBP to renew the lease(including marriage value). So if we get a discount of 10000 on the property it shouldn't be a problem. What are your thoughts on that?

varghesejim

hazyjo wrote: »

Are you buying with a mortgage? I would be looking for the vendor to extend before/as part of the sale - at their expense.

Jx

yes, we are going for an 85% mortgage. What that has to do with the lease?

kingstreet

Lenders set a minimum remaining lease as part of their lending criteria. You'll find them here;-

http://www.cml.org.uk/cml/handbook/englandandwales/question-list/321

hazyjo

varghesejim wrote: »

yes, we are going for an 85% mortgage. What that has to do with the lease?

kingstreet has prob explained above.

If you were a cash buyer, you'd obviously not have to worry about getting a mortgage, or finding they insist on a lease extension before you complete. Buying with a mortgage means they can refuse something with X amount of years remaining on a lease.

Jx

tim123456789

hazyjo wrote: »

Are you buying with a mortgage? I would be looking for the vendor to extend before/as part of the sale - at their expense.

Jx

Extending the lease would increase the value of the property.

Assuming that the current valuation reflects the value of the shortish lease there is no reason at all to expect the vendor to extend at his own expense.

The issue of whether the property is mortgagable with the current lease is entirely separate here.

tim123456789

cattie wrote: »

Unless the sale price is very cheap to reflect the cost of a lease renewal or extension, then you need to be pretty wary of leases that have less than 80yrs left to run.

This is because leases with less than 80yrs remaining are far more costly to renew than those with 80+ remaining.

.

The cost difference between a 77 year lease and an 80 year one is going to be tiny, perhaps 1% of the property value.

You have already indicated that it isn't going to be an issue with getting a mortgage so that isn't going to reduce the value