85 years left on the lease? sensible offer on a 250k flat?

james007ago

hope someone could advise me on this. me and my partner would like to buy a 2 bed flat which we like, asking price is 250k. its been on the market since march 2012, not plenty of viewings according to vendor. my biggest concern is it got only 85 years lease which in order to extend it to 125 years, we have to pay for 8.5k. we put our first offer of 232k plus we pay ourselves the lease extension but this was declined. this happened mid december. last monday we put a 234k + cost of lease extension. the manager told me that they wont even pass this offer to the vendor (i said to them that is 243k and this is what we are happy to pay the flat). they want me to offer around 240-241k + lease extension which is ridiculous. I have spoken to the vendor when i went for 2nd viewing last sunday that they were not aware of the first offer, is this because its too low (240k total)?
about us: we have mortgage in principle, no property to sell, have a 30% deposit excluding other fees + SD (set aside another 15k for this). my question is, is our offer reasonable? shall we hold it out?

Wyndham

I may be wrong, but I don't think you can start a lease extension application until you've been in a property for at least 2 years. Your offer is therefore meaningless in it's current form. The vendor needs to start the process, then sell.

hazyjo

Unless the vendor had specifically told the EA not to pass on offers over a certain amount, they were legally obliged to pass on that first offer. Grrr it makes me so mad!

£240k is not a low offer (certainly IMO anyway!).

As above, the quote is meaningless. It will no doubt go up year by year. Bear in mind, sometimes these figures are negotiable (by a considerable amount).

Personally, I wouldn't want to worry about the extension. Good intentions seem to go out the window once you're in. Will you have £10k or so in 2 years' time? Will you be bothered with the extension? I know I'd either not have the cash or I'd put it off. If you're stricter with yourself, it might be worth a risk.

Also bear in mind the flat is still likely to be worth £250k or thereabouts cos of the stamp duty threshold. If you pay say £245k and spend £10k+ on the lease, you are not going to sell the flat for £255k. I would definitely want the vendor to incorporate the lease extension in with my purchase.

If he won't budge, I'd be tempted to sit tight as he'll have the same issue with any other buyer.

Good luck.

Jx

spacey2012

These leasehold flats are the new endowment morgages. They will break and fall as you own the lease not the bricks and motar.
Many have been sold on buildings that wont last 125 years without serious structural intervention and the clauses leave lease holders paying the bills to rebuild what they do not own.
You dont have to be a genius to see the timebomb ticking away under neath them as the calender counts down , as it does over the years.

tim123456789

Wyndham wrote: »

I may be wrong, but I don't think you can start a lease extension application until you've been in a property for at least 2 years. Your offer is therefore meaningless in it's current form. The vendor needs to start the process, then sell.

The vendor appears to have an offer from the LH for a non statutory "new" lease.

Thus it seeems likely that they will take up the offer as part of the sale process.

(and FWIW the cost of the offer appears to be at the high end of reasonable)

james007ago

forgot to mention but yes the vendor will start the process and we continue. since i put the offer last monday of 234k, the agent tried to ring me after 2 hours. he said he spoke to the vendor and they inform him they will accept 238k. this doesnt make sense bec it means im now paying 249k. i think i wont increase the offer cos i believe that the EA is talking rubbish now.

mart.vader

I was advised that it really only gets critical at less than 70 years, because of Lenders not wanting to mortgage the property. This may not be the case now.

When I was trying to extend my lease, the Freeholder put up all conceivable objections to it, even pretending not to have received my recorded delivery letters.

I eventually had to go to the LVT. http://lease-advice.org.uk/ They may be able to give you some advice.

The Freeholder in my case sent back the counter-notice with his "valuation" on it, then tried to charge me £400 for a ten minute "valuation" carried out five months later. When I refused to pay, he took me to court. At the hearing, the judge informed him that LVT cases cannot be heard in court. The case was referred to the LVT where he pretended that my notice wasn't valid. The LVT didn't accept his version, they told him that he couldn't charge for a valuation, after the counter-notice had been served. Unfortunately, they made me pay about £200 for his estimate.

Jeez, I'm rambling. What I'm trying to say, is ask the Lease Advice for advice.

hazyjo

james007ago wrote: »

forgot to mention but yes the vendor will start the process and we continue. since i put the offer last monday of 234k, the agent tried to ring me after 2 hours. he said he spoke to the vendor and they inform him they will accept 238k. this doesnt make sense bec it means im now paying 249k. i think i wont increase the offer cos i believe that the EA is talking rubbish now.

Not sure what you mean by you continuing. Don't you have to have owned it for two years to be able to extend the lease?

Jx

tim123456789

hazyjo wrote: »

Not sure what you mean by you continuing. Don't you have to have owned it for two years to be able to extend the lease?

Jx

If the vendor has agreed the right to buy the new lease from the FH he can assign that right to his buyer to complete the process immediately.

Leaseman_2

The critical length for a lease is 80 years as that is the threshold below which marriage value kicks in and the cost of lease extension jumps.

If the vendor is a qualifying leaseholder (principally they have owned the flat for 2 years) they can serve a Section 42 notice claiming a lease extension (actually a new lease) for 90 years plus their present unexpired term at a peppercorn ground rent. They can then assign the benefit of that notice to you so that you don't have to wait 2 years before applying.

Be careful when negotiating/fixing a price subject to the vendor obtaining a non statutory lease extension as you may well get saddled with only a new 99 year lease and at a rapidly rising ground rent, an option that the vendor might agree to as it is often cheaper to them than lease extension on the statutory terms. Unless you stand firm you could end up disadvantaged by an onerous ground rent.

Make sure that your solicitor is fully up to speed on lease extensions and obtain proper valuation advice from a surveyor specialising in lease extensions/enfranchisement.