Leasehold dilemma

chillidonna

I own a leasehold property (mortgage free, value £130k) which I rent out. There are 58 years remaining on the lease and I believe it would cost around £25-30k to extend to 99 years.
I understand that a lease below 60 years may impact on the value/saleability.
If I decided to extend the lease, I would have to use all my savings, or borrow against the property; e.g. buy to let mortgage.
However, I intend to keep the property for the remainder of my life (which could be 30+ years) as the rental income supplements my pension.
I have no children or dependents and on my death the bulk of my estate will be willed to charity. So unless the property has to be sold to fund my care in later life, the sale won't be my problem!

Under the circumstances should I consider extending the lease?

G_M

From what you say, taking out a mortgage to extend the lease will

* reduce your disposable income
* increase the amount the charities will eventually receive.

If that's what you want - go ahead. Battersea Dogs Home will thank you (though you won't know about it).

I don't see how care funding would be affected: whether you extend the lease or not your assets are going to exceed the (18K?) limit for local authority support, so you'd have to self-fund (by selling the property or from other sources).

sparky130a

chillidonna wrote: »

I own a leasehold property (mortgage free, value £130k) which I rent out. There are 58 years remaining on the lease and I believe it would cost around £25-30k to extend to 99 years.
I understand that a lease below 60 years may impact on the value/saleability.
If I decided to extend the lease, I would have to use all my savings, or borrow against the property; e.g. buy to let mortgage.
However, I intend to keep the property for the remainder of my life (which could be 30+ years) as the rental income supplements my pension.
I have no children or dependents and on my death the bulk of my estate will be willed to charity. So unless the property has to be sold to fund my care in later life, the sale won't be my problem!

Under the circumstances should I consider extending the lease?

Given the scenario i guess it's how much of philanthropist you are.

Because leaving a property with barely 18 years left on the leasehold is going to cost any charity a substantial amount of time, effort and money. Greatly reducing the value you would leave behind to them.

Not knocking you at all but that's the reality.

System

Or sell while you're alive and invest in share or property funds instead, maybe through a pension for tax advantage

G_M

MatthewAinsworth wrote: »

Or sell while you're alive ...

Love it!

I believe the solicitors Code Of Practice suggests they should not undertake conveyancing for clients who are deceased....... :rotfl:

tim123456789

sparky130a wrote: »

Given the scenario i guess it's how much of philanthropist you are.

Because leaving a property with barely 18 years left on the leasehold is going to cost any charity a substantial amount of time, effort and money. Greatly reducing the value you would leave behind to them.

Why, it will still have a residual value that they can sell on

they'll probably just put it straight into an auction

Typhoon2000

I would extend it by 90 year using the stauatory process and take the lease to 157years and zero ground rent. It should cost less going b the calculator
http://www.lease-advice.org/calculator/

tim123456789

zagubov wrote: »

But wouldn't they and their their potential buyers face a substantially bigger cost to make it valuable again, compared with what the OP would have to pay now? And that'll lessen the value of the gift and the price it'll raise at auction.

Their buyer would, they wouldn't (they'd just get less for it at the auction)

Yes it will cost more than the OP doing it now, but the OP doesn't want to do that.

He wants to run the residual value down to not-very-much and give it away, whilst keeping his savings in the bank to do something else with

Cakeguts

If it was me I wouldn't extend the lease. It is all your money the best you can do is to enjoy as much of it as you can while you are retired and have plenty of time to spend it. The charities can have what is left over if there is anything. If you feel a bit guilty you can always give some of the rent to charity now.

System

A lease extension is a form of investment and it depends whether you have a better performing alternative

tim123456789

MatthewAinsworth wrote: »

A lease extension is a form of investment and it depends whether you have a better performing alternative

Though it's not an investment you can reasonably cash out for yourself

it can only be cashed out by your dependants (and he doesn't have any)