70 year lease on a property

saunaboy

This is from another thread so apologies if I'm breaking posting rules but I'd like to open this up to everyone.

I've had an offer accepted on a flat, 100% mortgage. The lease is 70 years according to the estate agent.

Does anyone have an opinion on this ??? I'm posting because I had a reply on my last thread saying it seemed a little short & may have an impact on future saleability. I'm buying to settle in there but don't want to shut off any option to move that I might have.

Is this lease too short & should I consider pulling out ?

pinkshoes

Personally I'd not buy a flat with less than 80 years left on the lease, but then other people might...

I'd find out how much it costs to extend the lease back to 99 or 125 years, and depending on this cost, make a decision on whether to buy or not.

matto

Personally I think you may need to give the offer a rethink once you're fully aware of the implications of the length of the lease. It seems likely the lowish asking price could be due in large part to the length of the lease.

This from a colleague-

Less than 70 years left on a lease is regarded as a short lease. It can be difficult to get mortgages though this is dependant on time to repay mortgage (forget interest only) and deposit. He is surprised you can get a 100% mortgage with less than 75 years on lease.

saunaboy

we've just got the agreement in principle at the moment.

Just about to set the lawyer off doing a search. will they advise us of the possible problems ???

cattie

saunaboy wrote: »

we've just got the agreement in principle at the moment.

Just about to set the lawyer off doing a search. will they advise us of the possible problems ???

Yes the solicitor will advise you of the true length of the lease (very often it's actually less than the estate agent has been led to believe by the seller)

You won't have trouble getting a mortgage on a 70yr lease, most lenders are happy to grant a mortgage as long as there is 65yrs left on the lease.
However I'm not sure how lender's will stand on a 100% mortgage.

A lease of 80yrs or under is more costly to extend than one with more than 80yrs remaining, as there is something called marriage value.

Perhaps you can find out via ea why the current owner didn't extend the lease before putting the property up for sale as they would have achieved a better price & the flat would have been much more attractive to buyers.

It was probably to do with cost, so this is something you need to be aware of. At sometime in the future you would want to sell the flat so would need to extend the lease if you want to attract buyer's & get a decent price for the property.

I can only trot out my usual advice about this government funded agency, http://www.lease-advice.org/newintro.htm
It offers help & advice on most matters concerning residental leasehold property & is a valuable resource & will explain things such as marriage value to you.

leasehorror

You will need to take into consideration the cost of extending the lease yourself If you continue with the sale. I have 69 years left and have been told by the freeholder the costs to extend the lease will be about 8k plus solicitors costs. The shorter amount of time left on the lease the higher the price to extend. I'm not sure but I also thought you had to live in the property for two years before you could extend the lease. I'm gutted....

Richard_Webster

leasehorror wrote: »

You will need to take into consideration the cost of extending the lease yourself If you continue with the sale. I have 69 years left and have been told by the freeholder the costs to extend the lease will be about 8k plus solicitors costs. The shorter amount of time left on the lease the higher the price to extend. I'm not sure but I also thought you had to live in the property for two years before you could extend the lease. I'm gutted....

How long ago did you buy it? Didn't your solr warn you about the possible high cost of an extension?

If someone approached me for a conveyancing quote wanting (as OP) to get a 100% mortgage on a 70 year lease I would tell them to think very seriously indeed about proceeding because the flat would have to rise in value quite considerably over a few years for there to be enough equity to cover the cost of paying for a lease extension and pay off the mortgage when the flat was sold. I wouldn't waste client's money on searches until they had thought that one through - and I would be inclined to tell the seller's solr that I could not advise any searches to be done until information was forthcoming as to the freeholder's terms for such an extension.

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.

saunaboy

great info, thanks.

the property was bought in 2001 when it had an 81 year lease left for 59k. We've just offered 150k and found out that there's 75 yrs left. We're getting a 100% mortgage.

I'm really not keen now. Other houses in the street are pushing 200k, which I guess could mean that the cost of extending could be pretty significant.

would anyone advise a renegotiation ?

natwill_3

Can you ask the vendor to get a quote for extension from the freeholder....

Can be anywhere between 6k to 20k.....my last flat, worth 220k, freeholder wanted 20k plus costs (theirs and yours!)

I would def get a figure and negociate on price

Any other buyer will do the same..if prices stay stagnant or indeed fall you might be unble to sell in future with no equity to use to extend?

saunaboy

at the very least we'll renegotiate.

The 150k valuation?asking price was set by the state agents so may noteven be the real value. My worry is that I pay 150k, then find out that it's real value is, say 140k, but up to 180k after extention. Bear in mind that there are similar properties on the same street set at 200k.

Then we'd be liable for a fair chunk of the difference right ?

olive84

We are buying a leasehold with 83 years left. I was a bit worried about the 2 years rule, as that would be pushing the 80 yrs threashold. Told sol and he said that you can get the vendor (providing they have been there for 2 yrs) to sign that right over to you so you can start proceedings as soon as you move in. Just a bit of useful info...