Buying a flat with a short lease (?)

IRememberItWell

We're both in our mid 70s and have seen a flat that has 58 years of its lease remaining. Inheritance is not a concern (no children) and the existing lease would obviously see us out. We could buy the flat outright without a mortgage and without selling our house, which we would then rent out. In principle, this seems a sound scheme but are there pitfalls that we have not thought of? Many thanks in advance for comments.
IRIW

AnotherJoe

Yes, why do this at all? With no disrespect but as you go into shall we say your Autumn years, why would you want the hassle and legal obligations of being a landlord? The main reason to do that would be for the income, but you coould get that by just selling the house and put the money into a really conservative range of investments including a lot of cash and just spend that down over the next 25 years.
This is obviously a cheap flat because of the lease but how suitable is it for other reasons? Is there a lift in the block ? Would perhaps a more purpose built retirement flat with facilities be better suited if you are looking 5+ years out?

AdrianC

AnotherJoe wrote: »

Yes, why do this at all? With no disrespect but as you go into shall we say your Autumn years, why would you want the hassle and legal obligations of being a landlord? The main reason to do that would be for the income

That's a different thread, Joe.

The yield on the investment would be higher than an equivalent flat with a longer lease, because of the lower purchase price. It makes a lot of sense as a BTL if you're taking a "Resale's not my problem" view of it. Put it in the hands of a full-management agent, and there's no problem with the amount of time and effort required - it'll obviously hit the return, though.

If you start to think about resale (Who will you be leaving your estate to? Even charity would benefit from a better resale price...) then once you've owned the place for two years, then the statutory lease renewal kicks into play. It'd be worth thinking about that sooner rather than later, because the cost increases rapidly as the lease shortens.

Re-reading the original, I may have misunderstood - the plan is to let the house out? For increased return, increased letability, and for easier disassociation from the emotional aspect, you may find it better to sell the house and buy a couple of flats to let.

AnotherJoe

AdrianC wrote: »

That's a different thread, Joe.

The yield on the investment would be higher than an equivalent flat with a longer lease, because of the lower purchase price. It makes a lot of sense as a BTL if you're taking a "Resale's not my problem" view of it. Put it in the hands of a full-management agent, and there's no problem with the amount of time and effort required - it'll obviously hit the return, though.

If you start to think about resale (Who will you be leaving your estate to? Even charity would benefit from a better resale price...) then once you've owned the place for two years, then the statutory lease renewal kicks into play. It'd be worth thinking about that sooner rather than later, because the cost increases rapidly as the lease shortens.

Re-reading the original, I may have misunderstood - the plan is to let the house out? For increased return, increased letability, and for easier disassociation from the emotional aspect, you may find it better to sell the house and buy a couple of flats to let.

I don't think it's different thread at all. The only plausible reason to let it out (or let flats out) is to get income. So the real question then is, is this the best way if getting income? In their specific circumstances I don't think it is.

THey could get the income by spending the money they get from selling the house and it doesn't matter if it's less efficient or there will be less omens left after say 20 years.

As for an agent taking all the strain, that's just not correct, IME if anything needs doing they still come back to you for permission all the time, if the agents are rubbish, which many are, then the tenants may end up hassling them directly, and the amount of money they will cost will likely make the income no different to just spending the cash.

Jox

I would advise against purchasing a flat with a lease much less than 80 years as it will cost thousands to increase the lease (my lease had 63 years left and I spent £18k recently including legal fees increasing it to 125 years).

anselld

Jox wrote: »

I would advise against purchasing a flat with a lease much less than 80 years as it will cost thousands to increase the lease (my lease had 63 years left and I spent £18k recently including legal fees increasing it to 125 years).

... and you have probably added more than £18k to the value.

Short lease flats can be a perfectly good investment if they are priced correctly.

Hoploz

The point is, they are planning not to renew the lease. The short lease is enough for them and they have nobody to inherit after they have gone.

They are asking, Is there a downside to this - to just leaving it with a short lease?

Apart from the financial one, I don't think so.

Consider other options as well though. For example, if you bought a nice 'mobile' (static) home, you wouldn't have the lease issue, and all the restrictions and charges that go along with lease hold properties.

IRememberItWell

Sorry folks, I didn't make myself clear. This is not a straightforward BTL matter; in fact we have three other houses that are already let out and are not proposing to sell these.

The flat in question would be for us ... on the basis that at some time in the future we might not be able to manage the stairs in our existing house. It's quite an expensive flat with high charges but the rental on our existing house would be more than enough to cover these. So it would not be a matter of downsizing but rather the opposite.

The flat has a share of the freehold but a short lease. We understand that, at present, a lease extension would cost around £50K but, given our age and the fact that we have no children, there would seem little point in going for an extension. But is it possible that, as the only owner in the block with a short lease, we might be disadvantaged in terms of charges and obligations?

Comments appreciated and renewed apologies for not making things clearer.

IRIW

marksoton

IRememberItWell wrote: »

Sorry folks, I didn't make myself clear. This is not a straightforward BTL matter; in fact we have three other houses that are already let out and are not proposing to sell these.

The flat in question would be for us ... on the basis that at some time in the future we might not be able to manage the stairs in our existing house. It's quite an expensive flat with high charges but the rental on our existing house would be more than enough to cover these. So it would not be a matter of downsizing but rather the opposite.

The flat has a share of the freehold but a short lease. We understand that, at present, a lease extension would cost around £50K but, given our age and the fact that we have no children, there would seem little point in going for an extension. But is it possible that, as the only owner in the block with a short lease, we might be disadvantaged in terms of charges and obligations?

Comments appreciated and renewed apologies for not making things clearer.

IRIW

Dear lord. A complete property empire you just forgot to mention?

Stop wasting peoples time.

IRememberItWell

Sorry - it was not my intention to waste anyone's time. My question may well also apply to others and I hope there will be further replies.
IRIW

anselld

Thenshort lease makes no difference as far as any other service charges, etc, are concerned.


Check the ground rent. A statutory extension would reset the ground rent so it may be that you would be paying more ground rent than those who have extended. However it may be a trivial amount, check the lease.