Leasing Q&A

i_watch

Hi

First time buyer. With our budget, will not be able to afford anything more than 2 bed leasehold flat. Hope someone wiser can help or refer to links where I can read more on the followings:

• Is it true if remaining lease is below 70 years, it would be difficult to get mainstream mortgages?

• Is the freeholder legally obliged to extend lease or sell you the freehold after certain years?What if they demand extortionate price and you cannot reach an agreement on extending lease or buy freehold?

• If the lease runs to zero year, do you just handover the keys to the freeholder?

In my mind, lease is just a long rental agreement but on this occasion, it would be nice if someone proves me wrong.

Thanks

jamie11

1. Yes.

2. You can take your problem to a tribunal, I think

3. Yes, it's a contract innit, if the lease runs out the property reverts to the freeholder.

Guest101

i_watch wrote: »

Hi

First time buyer. With our budget, will not be able to afford anything more than 2 bed leasehold flat. Hope someone wiser can help or refer to links where I can read more on the followings:

• Is it true if remaining lease is below 70 years, it would be difficult to get mainstream mortgages?

• Is the freeholder legally obliged to extend lease or sell you the freehold after certain years?What if they demand extortionate price and you cannot reach an agreement on extending lease or buy freehold?

• If the lease runs to zero year, do you just handover the keys to the freeholder?

In my mind, lease is just a long rental agreement but on this occasion, it would be nice if someone proves me wrong.

Thanks

You're basically right, it's actually renting is a short lease agreement. But in essence it's what you think ( fear ) it is.

Cornucopia

i_watch wrote: »

Hi

First time buyer. With our budget, will not be able to afford anything more than 2 bed leasehold flat. Hope someone wiser can help or refer to links where I can read more on the followings:

• Is it true if remaining lease is below 70 years, it would be difficult to get mainstream mortgages?

Yes.

• Is the freeholder legally obliged to extend lease or sell you the freehold after certain years?What if they demand extortionate price and you cannot reach an agreement on extending lease or buy freehold?

The whole process is regulated. Under the correct circumstances, there is a right to extend the lease at a fair price. (Also a right to buy the freehold).

• If the lease runs to zero year, do you just handover the keys to the freeholder?

In theory, although it's one of those things that rarely happens.

In my mind, lease is just a long rental agreement but on this occasion, it would be nice if someone proves me wrong.

Thanks

That's not a particularly helpful analogy. It's a different form of tenure to freehold, which builds in the necessary practical and legal differences of running a building divided into flats.

eddddy

i_watch wrote: »

• Is the freeholder legally obliged to extend lease or sell you the freehold after certain years?What if they demand extortionate price and you cannot reach an agreement on extending lease or buy freehold?

It's complicated (even though the law says it shouldn't be). Very briefly...

After you've owned a lease for 2 years, you have the statutory right to have the lease extended.

There is a statutory formula for working out the cost of the extension...

... but if the lease has less than 80 years to run when you extend it, the formula uses the 'marriage value' (see http://www.leaseextension-uk.info/marriage-value.html)

And if your surveyor says the marriage value is £x, but the freeholder's surveyor says the marriage value is £y - you might end up having to ask a court to decide. (Which could be very expensive!)

Richard_Webster

Your right to buy the freehold has to be exercised with a majority of the other flat lessees.

Buying the freehold of just your flat is like putting cash ona bonfire. You pay to buy the freehold - the flat goes down in value by maybe 30% and then you have tyo pay again to put everything right! Few mortgage lenders will lend on a flat which is freehold and the other flats in the block have a separate freehold or freeholds.

There are cases where you can own the frehold of your flat and it will be mortgageable but only where you won the freehold of the whole building yourself or do so in conjuction withe other flat lessees (what some called "shared freeehold").

i_watch

Thanks everyone. I really appreciate the help I have received so far.