Length of Lease on sale of bungalow and the Future.

Touchstone_2

My wife and I can perhaps be best described as being on the wrong side of 79. We are looking for advice about the advantage/disadvantage of owning a bungalow that is leasehold with approximately 89 years of the lease remaining. When we bought the property our solicitor advised us against buying the freehold. Can't remember all his reasoning but I think it revolved around the lease which was for 125 years starting in 1982. We bought the property in 1988. I think also he was factoring in that at age 52 we would be "long gone" as the expiry of the lease approached.
I discussed with my family that as we would be leaving the property to them they might want to buy the leasehold, we could not afford to do that at that time, they declined.
It is of course the future bit that causes me concern. should one of us have to go into care, could the property be used in any way to provide for our care. Should there be only one of us remaining, if the property had previously been used to cover care costs, the lease would then be down to say 70 years. What impact would that have on disposal and would the property belong to the care provider or some other irrespective of our wills provision?

AdrianC

The only thing that a short lease affects is how easy it'll be to sell - and, from that, how much it'll sell for.

You don't say where the bungalow is, or the approximate value, but you may well find a statutory lease extension now is worth considering.

Assuming it's outside prime central London, worth £200k, and a peppercorn ground rent, then the extension will only cost around £2-3k now. Once it goes beneath 80 years, the price starts to rise rapidly because of "marriage value" - and a new owner can't use the statutory route until they've owned it for two years. So you've really got about 7 years left before the short lease starts to affect the value.
http://www.lease-advice.org/calculator/

xylophone

also he was factoring in that at age 52 we would be "long gone"

:eek:

With regard to either of you having to go into care, the value of the property would be disregarded if one of you remained in the property.

If both of you had to go into care, then presumably the bungalow would be sold for its market value at the time ( which would be affected by the term of the lease then remaining) and the money used to fund your care?

http://www.ageuk.org.uk/documents/en-gb/factsheets/fs38_treatment_of_property_in_the_means-test_for_permanent_care_home_provision_fcs.pdf?dtrk=true

If you are both 80 plus, even if you live to age 122

https://en.wikipedia.org/wiki/List_of_the_verified_oldest_people,

there'll still be some lease remaining.......

G_M

If you have the cash, it's probobly worth either buying the freehold, or extending the lease - but you need to do the maths.

With the freehold, or an exteded lease, the value of what your family inherit will increase. Without it, the value of the lease they inherit will start dropping as each year passes and the remaining length of lease reduces.

The above is quite separate from the issue of care home funding.

If one of you goes into care, eligibility for local authority funding will depend on that person's inclome/assets excluding the property (since it is the other person's home).

If you both go into care, eligibility for local authority funding will depend on each person's income/assets including the property (since it would nolonger be anyone's home).

Touchstone_2

Thank You. As "G_M" pointed out I am confusing the Length of Lease with care provision. I will follow that aspect with Age UK. and their fact sheets.
I have looked at the info about Lease Extensions as given by "AdrianG" and and although it describes the process applicable to a Flat I assume it would be the same for a House.
Our property is in the Wigan/Warrington area and the lease is held by the Council. I assume my next step is talking to them to ascertain what is involved. But before I do:
Can the lease holder refuse to sell me the lease or to agree to a lease extension?
Is there a formula that is used in the calculation of the lease payment?
At what stage should I involve the professionals and which should they be?
The other more personal problem is the family. Having refused to finance me to buy the lease for their benefit, the house and everything else will be theirs, I wonder if I should just forget about them and their future. But of course I wont be able to do the maths until I ask the questions of the Lease Holder.

AdrianC

Touchstone wrote: »

I have looked at the info about Lease Extensions as given by "AdrianG" and and although it describes the process applicable to a Flat I assume it would be the same for a House.

Yes.

Can the lease holder refuse to sell me the lease or to agree to a lease extension?
Is there a formula that is used in the calculation of the lease payment?

There are statutory routes to go down. You have a legal right to use them.

There are also other routes, direct negotiation - which can result in a smaller upfront renewal cost, but potentially at the trade-off of a higher (and escalating) ground rent, which itself can devalue the property.

The other more personal problem is the family. Having refused to finance me to buy the lease for their benefit, the house and everything else will be theirs, I wonder if I should just forget about them and their future.

If they're going to be ungrateful about it, then there's always... https://www.battersea.org.uk/support-us/gifts-wills/how-leave-gift-your-will
<grin>

xylophone

Having refused to finance me to buy the lease for their benefit,

If they had done this and you both had to go into care and the bungalow sold, they'd have lost out.

If they had chosen to lend you the money and taken a first charge on the property, (possibly with an interest rolled up arrangement), they would have been able to claim their "investment" on sale before the balance was used to fund care.

https://www.gov.uk/leasehold-property/buying-the-freehold

G_M

http://www.lease-advice.org/ is your best source on your rights to extend the lease and/or buy the freehold.

Touchstone_2

Slightly off topic but..
Looking at provision for possible future care and the relation of property to care provision. Is there any advantage in altering the ownership of the property? i.e. Property is currently in joint names or ownership of the property is on a 50/50 basis.

moneyistooshorttomention

xylophone wrote: »

If they had done this and you both had to go into care and the bungalow sold, they'd have lost out.

If they had chosen to lend you the money and taken a first charge on the property, (possibly with an interest rolled up arrangement), they would have been able to claim their "investment" on sale before the balance was used to fund care.

https://www.gov.uk/leasehold-property/buying-the-freehold

That sounds more logical to me as to being the reason they have said they won't cover the cost of the freehold - ie because of the fear that the house might end up getting taken by the Council for care costs and the Council refusing to believe that some of the money tied up in the house was theirs (ie what they had put in to buy that lease).

I wouldnt cover the cost of buying the lease either in those circumstances - but I wouldnt be refusing per se. I would just be worried as to whether the Council might grab the money I put into buying your freehold.

It's possible that another reason they didn't agree to fund buying the freehold is simply because they literally don't have the money to do so - and therefore can't afford it.

If they can afford it and are willing to do so in principle - then...yes...I think them handing you the money as a loan and with a charge being taken on the house would be a way they can be certain of getting their money back (whatever the Council does about trying to grab the house). In their position - then I would be prepared to do that - if I could afford that (and that's a whole different question...).

**********

I think the thing to be aware of is that "the next generation down" (ie us Baby Boomer people) are very conscious (if we're sensible) that any money tied up in our parents house could go one of several ways, rather than getting inherited by us. It could:

- get grabbed by the Council for care home costs (that is the single biggest factor we are conscious of).

- there are a few in your generation that are just "bypassing" us and leaving money straight through to grandchildren (ie leaping a generation and there are a few of our generation that don't inherit because it goes "whizzing past our nose" to the next generation). That can apply even if we're still not financially straight yet..

- who knows what Will-changing might happen if dementia is influencing a persons mind (ie they're not thinking straight and leaving it as they really want to - because of "balance of mind being disturbed"). I hasten to add that I'm not saying that applies to you obviously....

At this point - I do hasten to add that it's fine by most of us if our parents "blow the lot" on themselves personally by choice and decide to go on world cruises every year. At least they've had the use of their own money - and it hasn't gone to Councils or grandchildren.

Hence - we're unlikely to take part in any arrangement of tieing our money up in a parents house unless we have some sort of guarantee we definitely will get it back later on (eg a charge on the house).

Pixie5740

Touchstone wrote: »

Slightly off topic but..
Looking at provision for possible future care and the relation of property to care provision. Is there any advantage in altering the ownership of the property? i.e. Property is currently in joint names or ownership of the property is on a 50/50 basis.

It might make a difference owning the leasehold as tenants in common rather than joint tenants.

For the purpose of means tested care your home won’t be counted if it’s still occupied by:

* your partner or former partner, unless they are estranged from you
* your estranged or divorced partner IF they are also a lone parent
* a relative who is aged 60 or over
* a child of yours aged under 18
* a relative who is disabled.

http://www.ageuk.org.uk/home-and-care/care-homes/the-means-test-and-your-property/

Where the TiC/JC ownership would make a difference is that as TiC you can leave your share to whomever you like in your will whereas with JT the surviving JT would automatically become the sole owner. So I guess changing ownership probably has more to do with inheritance than care home fees really.