Leasehold Flat - 79 Years Left

omariqy

Hi all

I am searching for a 2 bed flat for my mother and sister. I have come across one which seemed very under priced. It turns out the lease is for 99 years from 1997. Is it worth pursuing this as I have no idea how hard it will be to extend the lease? The vendor is not interested in extending the lease before selling. I know you have to have owned the property for 2 years before being able to apply. However, how long is the process and what are the costs?

AFF8879

Personally, I wouldn't touch it as lease extensions are more hassle than they are worth - in a perfect market the discount on this flat should reflect the cost of extending the lease, which will be in the tens of thousands of pounds, but often the freeholder will try to overcharge you / even go AWOL.

There are procedures in place from the leasehold advisory council to settle such situations, but it takes a lot of time - and once the lease goes below 80 years, the cost of extending rises sharply - so the cost of extension in 2 years time, when you're allowed to extend, will be much more than it is now.

Obviously if you're not worried about resale value / inheritance then it would be perfect.

omariqy

AFF8879 wrote: »

Personally, I wouldn't touch it as lease extensions are more hassle than they are worth - in a perfect market the discount on this flat should reflect the cost of extending the lease, which will be in the tens of thousands of pounds, but often the freeholder will try to overcharge you / even go AWOL.

There are procedures in place from the leasehold advisory council to settle such situations, but it takes a lot of time - and once the lease goes below 80 years, the cost of extending rises sharply - so the cost of extension in 2 years time, when you're allowed to extend, will be much more than it is now.

Obviously if you're not worried about resale value / inheritance then it would be perfect.

I need to figure out whether it is a fair price or not. If it is a fair price then my mum has sufficient cash reserves to cover costs of extending the lease. However, if the freeholder is going to be awkward then it may not be worth it.

starshapedbrick

Lease extensions are very tricky to cost out ahead of time, and the shorter the lease the higher the potential cost to you. The calculation of cost needs to be worked on an individual property basis and elements of the calculation are largely speculative in relation to future value.

Who owns the leasehold? Is it a management company or owned by other residents in the block? You would also be liable for not only your own surveyors and solicitors costs but also those of the leasehold owners, and a leasehold extension can be a drawn out process.

Finally, a lease with less than 80 years left to run may not acceptable to a mortgage lender, and once that goes done to 70 years it is likely to be impossible to get a mortage on. Having owned a leasehold flat previously and gone through the extension process I would not personally buy leasehold again.

omariqy

starshapedbrick wrote: »

Lease extensions are very tricky to cost out ahead of time, and the shorter the lease the higher the potential cost to you. The calculation of cost needs to be worked on an individual property basis and elements of the calculation are largely speculative in relation to future value.

Who owns the leasehold? Is it a management company or owned by other residents in the block? You would also be liable for not only your own surveyors and solicitors costs but also those of the leasehold owners, and a leasehold extension can be a drawn out process.

Finally, a lease with less than 80 years left to run may not acceptable to a mortgage lender, and once that goes done to 70 years it is likely to be impossible to get a mortage on. Having owned a leasehold flat previously and gone through the extension process I would not personally buy leasehold again.

Thanks. I will try and find out more details. My mum will be a cash buyer so no issues on a mortgage.

starshapedbrick

omariqy wrote: »

Thanks. I will try and find out more details. My mum will be a cash buyer so no issues on a mortgage.

It's best to get as much information as you can - looking back, mine took nearly 18 months to complete, and the cost was around one sixth of the value of the flat once I took into account the actual extension price and the fees. I was dealing with a Management Company and even with an experienced surveyor negotiating for me (who got them to knock a third off their original offer), a very committed legal executive and me getting on the phone regularly to chase it dragged on and on and on.

If you are committed to this property, it would be worth pushing the vendor to start the process as a condition of offer - you would need to take advice on this (I have seen properties advertised which this as an option) but that could be a way around the time restriction on applying for the extension in the first place. If it can be done that way then it may be worth paying extra now to maybe save some money down the line.

eddddy

Assuming you want to go for a statutory lease extension (adding 90 years to the current term, and dropping the ground rent to zero)...

• You can ask the seller to serve a section 42 notice on the freeholder - then you don't have to wait 2 years to extend. Any decent conveyancing solicitor will fully understand what this involves.

• You can get get an indication of the cost of a Statutory Lease Extension using one of the internet calculators. For example: http://www.moneysavingexpert.com/mortgages/extend-your-lease (and scroll down)

• Allow for up to £4000 in professional fees, in addition to the cost above.

• Expect the process to take between 6 months and 18 months - depending on how hard your freeholder fights.

• If you instruct an experienced solicitor and surveyor, they will just get on with it. You don't have to do much (except pay their bills - as above).

So you should adjust the price you're willing to pay in order to take account of the above costs (and maybe adjust a bit further, to compensate for the extra hassle).

omariqy

Thank you for your help all.

always_sunny

if you like the flat, it's priced right and plan to keep it long term, extending the flat might be a pain but (I think) it's better than a flat extended by someone else with high Ground Rent and/or Service Charge.

It may take a year+ but at least after it's peppercorn rent.

omariqy

always_sunny wrote: »

if you like the flat, it's priced right and plan to keep it long term, extending the flat might be a pain but (I think) it's better than a flat extended by someone else with high Ground Rent and/or Service Charge.

It may take a year+ but at least after it's peppercorn rent.

I think it's on for about £25k to £35k under what it would be worth if the lease was extended.