Buying a flat with 62 years left on lease

TonicBristol

I'm hoping someone can give some words of wisdom. Currently I've been seriously looking to buy a property between £140K-£180K, with a sizeable deposit and an agreement in principle.

Saw a lovely 2 bed flat earlier for £140K, with a garden and garage. It previously sold a few months ago and according to the EA it sold for the full asking price, but the sale fell through when the buyer was relocating for work and their job fell through. Apparently the suveys and solicitor's searches were all done and came back fine, but there is only 62 years left on the lease.

The EA says they weren't able to get an estimate for increasing the lease from the landlord, but according to the calculator on this site it's estimating circa £15K to extend the lease. This flat last sold in 2006 for £126K - So, would you go for this?

Places in this area rarely come up and I actually placed a sealed bid on a semi detached house around the corner for £177K, (asking price was £169,950) but outbid and the house was only on the market for two days.

ognum

Do you need a mortgage? if you do you may find it very difficult.

TonicBristol

ognum wrote: »

Do you need a mortgage? if you do you may find it very difficult.

Thank you, that's what I was fearing as I need a mortgage of £110K.

Realistically, do you know what mortgage term a lender would typically/likely go to on such a short lease?

Annisele

As an example, Halifax probably wouldn't lend at all. It says "If leasehold, the property must have an unexpired term of more than 70 years at application".

That doesn't mean you wouldn't get a mortgage anywhere - but 62 years is likely to be a problem.

I'd also be a bit concerned about the vendor's inability to get a quote for the lease extension. It's fairly common for the lease extension and the sale to happen at (pretty much) the same time - essentially the vendor uses the buyer's money to pay for it - but if the freeholder is being awkward, that makes things much harder.

ognum

If you cannot get the vendor to extend the lease then you will have to wait another two years before you can extend.

The cost of the lease extension will be more costly the shorter the lease becomes (Google marriage value)

With a short lease you will need to go to a broker for a mortgage, you choice will certainly be very limited. below 70 years you are pretty stuck.

TonicBristol

Thank you Annisele and ognum - You've helped me make up my mind and decide not to go for it, unless the vendor is able to provide a quote to extend it and get it done ASAP.

On paper for this area, it's an incredible deal as two bed flats rarely go for less than £160K, but if something is too good to be true...

A cash buyer will snap it up as the renting it would get circa £750 pcm, so I would expect that's the reason for not extending the lease. I rent a similar property about a mile away and have been paying £725 pcm for the last 18 months.

ognum

TonicBristol wrote: »

Thank you Annisele and ognum - You've helped me make up my mind and decide not to go for it, unless the vendor is able to provide a quote to extend it and get it done ASAP.

On paper for this area, it's an incredible deal as two bed flats rarely go for less than £160K, but if something is too good to be true...

A cash buyer will snap it up as the renting it would get circa £750 pcm, so I would expect that's the reason for not extending the lease. I rent a similar property about a mile away and have been paying £725 pcm for the last 18 months.

It is probably not such a bargain if a similar flat with a long lease goes for 20 - 30k more. They will find a cash buyer who will let it out and work to negotiate a longer lease which could end up costing somewhere close to 20k.

Sadly I think you are right to not go for it, if the freeholder is difficult to locate and pin down you will have to wait two years and then negotiate because they are forced to.

Move on!

Hoploz

Did the vendor say they can't get a quote for the extension? I thought you said the EA couldn't.

My understanding is a lender is likely to want 30 years remaining after the end of your term, so if you took a 25 year mortgage the minimum would be 55 years left on the lease. But I imagine different lenders gave different criteria so advice from a broker would be necessary if you want to proceed.

I believe to renew a lease you have to be the leaseholder for 2 years, so this is the reason the seller is normally asked to begin the process rather than a buyer. Who pays would presumably be something you'd negotiate at the point of making an offer.

TranceNRG

Is it a normal leasehold? If it's a leasehold with a share of freehold, 62 years left on the lease would be OK with most lenders I think but different story if it's a straight leasehold property and best to look at a different one.

TonicBristol

Thank you to all who have posted on here. I rang the agent today and she's aware of the flat downstairs negotiating a 90 year extension for roughly £10K. She offered to speak to the vendor to see if they're willing and to apply for a lease extension as part of the sale as suggested by ognum and will let me know.

Thank you kindly.