Buying an apartment with a reducing lease

3card

Hi All

I am looking for some advice.
I have seen an apartment for sale with a long term tenant already living there but the property was built in 1991 with a 99 year lease so on paper the lease has 74 years left which i am assuming is the reason the apartment is on the market a lowish price.

If i believe i cant apply to increase the lease by another 90 years until i have owned the property for 2 years.

The rental income would give me a yield of 8% gross and 6% net after the ground rent and service charges.

I would be able to buy the apartment for cash so there is no lender involved.

My questions are is there anyway to find out what the increase in the lease would cost before i were to purchase and do i have to wait the 2 years because i have read that the price increases as the lease runs down??

This is my 1st involvement with regards to a leasehold property

Thanks in anticipation for any replies

AdrianC

The reason the flat is apparently cheap is that it's got a long-term tenant in situ. What sort of tenancy are they on? When did they move in?

The short lease is a factor, but not the main one.

ChumpusRex

The cost of lease extensions depend on a lot of things. There are calculators around online which can help, but ultimately it will need to be agreed between you and the top landlord with advice from an expert in lease valuation.

As a rough indication, if you have a £200k flat, with 72 years remaining and want to add an extra 90 years, then a ballpark guess would put the cost around £15-20k including solicitors fees.

eddddy

3card wrote: »

i believe i cant apply to increase the lease by another 90 years until i have owned the property for 2 years.

That's not necessarily correct.

The current owner can serve a section 42 notice to start the lease extension process, before selling to you.

You can then continue the process without waiting 2 years.

(This assumes the current owner has owned the property for at least 2 years.)

3card

AdrianC wrote: »

The reason the flat is apparently cheap is that it's got a long-term tenant in situ. What sort of tenancy are they on? When did they move in?

The short lease is a factor, but not the main one.

Thanks for this reply.
I see the tenant as a plus because i am looking to purchase as an investment and the current tenant has been in the apartment for approx 2 years.
The agents told me he will be on a 6 month rolling contract.
When i viewed the property i asked the tenant what his plans are and he said he wants to stay there for at least the next 12-15 months because he is a teacher and if he were to move it would be in the summer months

Cakeguts

3card wrote: »

Thanks for this reply.
I see the tenant as a plus because i am looking to purchase as an investment and the current tenant has been in the apartment for approx 2 years.
The agents told me he will be on a 6 month rolling contract.
When i viewed the property i asked the tenant what his plans are and he said he wants to stay there for at least the next 12-15 months because he is a teacher and if he were to move it would be in the summer months

2 years is not a long term tenant. Do you need a mortgage? Can you get one for a lease of 74 years?

3card

eddddy wrote: »

That's not necessarily correct.

The current owner can serve a section 42 notice to start the lease extension process, before selling to you.

You can then continue the process without waiting 2 years.

(This assumes the current owner has owned the property for at least 2 years.)

Thanks for the reply

I wasnt 100% sure if they could start the process for me.
Im not sure how receptive the seller will be because the apartment is up for sale much less that he paid for it which was a few years ago (more than the 2 years)
I will ask the agents to sound the seller out

Much appreciated

3card

Cakeguts wrote: »

2 years is not a long term tenant. Do you need a mortgage? Can you get one for a lease of 74 years?

No i dont need a mortgage. It would be a cash sale

What term would a long term tenant be classed as?

AdrianC

3card wrote: »

What term would a long term tenant be classed as?

Long enough to be on an AT rather than an AST.

Pixie5740

Have you ever been a landlord before? Before embarking upon this venture it might be a good idea to read G_M's Guides for Landlords and Tenants: Tenancies in England/Wales first.

It's important you establish exactly what sort of tenancy the current tenant has in place and to make sure that any deposit is transferred over to you and has been properly protected.

StumpyPumpy

3card wrote: »

Thanks for the reply

I wasnt 100% sure if they could start the process for me.
Im not sure how receptive the seller will be because the apartment is up for sale much less that he paid for it which was a few years ago (more than the 2 years)
I will ask the agents to sound the seller out

Much appreciated

It is not expensive to start the ball rolling all they need to do is serve a Section 42 notice to start the lease extension process and assign the benefit of the notice to the purchaser (ie you), I'm sure your solicitor and their solicitor could come to an arrangement where you'd pay for it and all the vendor would need to do is sign on the dotted line, I doubt any sensible vendor would object.

When the Section 42 is served the clock stops ticking so it doesn't get two years more expensive as it would if you had to wait to qualify, not as important to you as some as it is already less than 80 years but still a consideration.


SP