Buying a flat with a 58 year lease

needhouseadvice

I'm a FTB so I would need a mortgage. I've seen a flat I like but it only has 58 years left on the lease. If I offered extra for the owner to extend as part of my offer would this be an easy enough thing for him to sort out? Or would I be entering a legal headache as I've heard lease extensions can be a nightmare depending on what the freeholder's like?

Basically should I stay clear?

eddddy

As a starting point, ask the EA if the seller is prepared to arrange for a lease extension on completion.

If they're not, you probably won't get a mortgage - so you'll have no choice except walking away.

If they are, it's likely to be time consuming and you'll need specialist advice (i.e. higher fees etc) - and realistically, there are more things that could make the purchase fall through.

So if the flat is a good price (after taking account of fees, lease extension costs etc), and you don't mind waiting, extra hassle and the increased risk of the purchase falling through, it may be worth considering.

If you prefer something quick, easy, low risk - it's probably not for you.

LEJC

In all honesty it all depends on the seller and how much they want to get involved....I've just been in a similar situation where all efforts to get the seller to sort out the lease before the contracts were exchanged have fallen on deaf or reluctant ears...so decided to pull out.

certainly with such a short lease you might find it difficult to get a mortgage without the extension in place first.

HappyMJ

needhouseadvice wrote: »

I'm a FTB so I would need a mortgage. I've seen a flat I like but it only has 58 years left on the lease. If I offered extra for the owner to extend as part of my offer would this be an easy enough thing for him to sort out? Or would I be entering a legal headache as I've heard lease extensions can be a nightmare depending on what the freeholder's like?

Basically should I stay clear?

Unless you can get a mortgage which with 58 left at the beginning is very unlikely. You might only be entitled to a mortgage term of 18 years so there is 40 years remaining when the mortgage should have been repaid by. As a FTB it's more likely to be able to afford the mortgage you're going to go for the longest term possible.

You might want to look into that as some mortgages require term plus 25 years and some require initial term of 85 years.

needhouseadvice

eddddy wrote: »

As a starting point, ask the EA if the seller is prepared to arrange for a lease extension on completion.

If they're not, you probably won't get a mortgage - so you'll have no choice except walking away.

If they are, it's likely to be time consuming and you'll need specialist advice (i.e. higher fees etc) - and realistically, there are more things that could make the purchase fall through.

So if the flat is a good price (after taking account of fees, lease extension costs etc), and you don't mind waiting, extra hassle and the increased risk of the purchase falling through, it may be worth considering.

If you prefer something quick, easy, low risk - it's probably not for you.

I don't mind waiting but if there's an increased risk of it all falling through at the end then it's not worth it. So the lease extension only happens on completion then and not before?

It was previously on the market a few months ago and sold to a cash buyer so it could be the seller is too lazy to extend. Which is so silly really - surely they could get a lot more for a proper lease?

cattie

You have to ask yourself why the owner/vendor has not already extended or at least started the process to extend the lease as it would make the flat more valuable as well as being much more attractive to buyers. Cost no doubt would be the reason for the vendor not to have got the extension process underway in an effort to help sell the flat.

With an extended lease the flat would have a sale price of the same as any other similar property in the area, so really you might just as well forget all about this one, which will only be of interest to cash buyers, & look elsewhere.

needhouseadvice

cattie wrote: »

You have to ask yourself why the owner/vendor has not already extended or at least started the process to extend the lease as it would make the flat more valuable as well as being much more attractive to buyers. Cost no doubt would be the reason for the vendor not to have got the extension process underway in an effort to help sell the flat.

With an extended lease the flat would have a sale price of the same as any other similar property in the area, so really you might just as well forget all about this one, which will only be of interest to cash buyers, & look elsewhere.

Yeah, I think it would be around £20k to extend. Looks like I will have to forget about this one.

eddddy

needhouseadvice wrote: »

So the lease extension only happens on completion then and not before?

Frequently, Yes - because finance is usually an issue.

As an example:
- Flat with 58 year lease is worth, say, £100k
- Lease extension costs, say, £20k

- But the seller doesn't have £20k spare, so cannot extend the lease before completion.

So, on the day of completion, the buyer pays £120k. Of that, £100k goes to the seller, and £20k goes to the freeholder.

needhouseadvice wrote: »

It was previously on the market a few months ago and sold to a cash buyer so it could be the seller is too lazy to extend. Which is so silly really - surely they could get a lot more for a proper lease?

So the seller hasn't owned the flat for 2 years, so cannot do a Statutory Lease Extension (unless the previous owner served a section 42 notice).

So it may be impossible for the seller to get a lease extension, if the freeholder is unwilling.

Jox

Hi, I bought my flat 11 years ago and it only had 73 years left on the lease, I was naive and didn't know about this and no-one thought to advise me...2 years ago I extended the lease and the freeholder wanted £15,000 and I paid £3,000 in legal fees - the lease is now 125 years but ouch that was a painful expense!

needhouseadvice

eddddy wrote: »

Frequently, Yes - because finance is usually an issue.

As an example:
- Flat with 58 year lease is worth, say, £100k
- Lease extension costs, say, £20k

- But the seller doesn't have £20k spare, so cannot extend the lease before completion.

So, on the day of completion, the buyer pays £120k. Of that, £100k goes to the seller, and £20k goes to the freeholder.




So the seller hasn't owned the flat for 2 years, so cannot do a Statutory Lease Extension (unless the previous owner served a section 42 notice).

So it may be impossible for the seller to get a lease extension, if the freeholder is unwilling.

Sorry I explained that badly. The cash buyer pulled out - that's why it's back on the market.

So on exchange they would get the money for the lease and it would all be sorted by completion - is that right?

marksoton

Personally i really wouldn't bother with the aggro.

You stand to gain very little for a lot of paperwork and faffing around.