Purchasing a leasehold flat - advice appreciated

HeyBear

Hi all,
Looking to buy my first home soon and a family friend mentioned he has a flat that is about to go on the market. He was going to (advised) put it on for around £110,000 but would come down to £105,000 if I wanted it.

I've just found out that the leasehold is down to 75 years already. Initially, family seemed to think the issue of leasehold was a non-issue and matters were resolved in pennies, obviously after a brief bit of research, that certainly isn't the case!

Would appreciate any advice that you can give on the matter, the plan was to renovate gradually starting with a new bathroom as while the flat isn't unliveable, it's certainly dated. This would help bump the resale value if I wanted to sell down the line.

Having looked into the time bomb that leaseholds seem to be though, without taking the hit and extending the lease, it could well be unmortgageable by the time I come to sell up and sale value would plummet, negating any renovations that were done.

Previous sales price for the flats all seem to be in this region and estate agents listings never seem to make an issue other than mentioning that the property is leasehold. Is this matter just brushed under the carpet or is it something that comes up with the solicitors when you get to that part of the proceedings?

Is there anyone I can go to that might be able to provide advice on the situation without paying £xxx's, or is this just something that will cost money to look into?

Appreciate any advice that you can give on the matter, just trying to get ahead of what looks to be a big issue with a potential first time buy.

hazyjo

Advisable to get the seller to extend as a condition of sale. You ask how many years are left on the lease with any flat - and don't trust EAs, get your solicitor to check if it's one you're buying. The others that have sold may well have had extended leases. If you buy, you'll prob be waiting two years before even being able to extend the lease, taking it down to nearer 70 years. It will get pricier year by year to extend.

IAmWales

Ask the current owner to find out the cost of renewing the lease, then negotiate accordingly. Obviously if they were to renew the lease now, that would increase the value (and asking price) of the property.

Also check the cost of service charges and ground rent, any proposed major works and any clauses regarding increasing the ground rent.

eddddy

If you want a 'Statutory Lease Extension', there are online calculators which will give an indication of cost.

For example:
http://www.moneysavingexpert.com/mortgages/extend-your-lease (scroll down)

http://www.lease-advice.org/calculator/

You will need to allow for about £4k in fees on top, and it usually takes 6 to 18 months.


Or you or the seller could negotiate an informal lease extension with the freeholder.

But you need to be careful. Informal lease extensions can sometimes look cheap but be a major 'rip-off'. In extreme circumstances, they could make a flat unmortgageable.

ellectrastar

Myself and other half naively bought a leasehold flat as our first buy-to-let property. Would not do it again. The lease ticks down and the lower it gets the more unattractive it is should you sell it on later. Also we are tied in on a group insurance which invariably goes up every year and there's no way to change it or negotiate another one. Even with 75 years left (ours is not much less than this) it can still be off-putting as it almost feels like you don't really own it. I still don't understand the point of leasehold properties...

eddddy

ellectrastar wrote: »

I still don't understand the point of leasehold properties...

You need some kind of mechanism for dealing with the concept that 2,3 or 20 flats are sitting on the same footprint of land, and rely on the same building structure. (i.e who owns that single piece of land that has multiple properties stacked on top of it? Who's responsible for the building's foundations, roof etc?)

The concept of shared freeholds can help - i.e. all the leaseholders jointly own the land and building structure.

But then the joint freeholders all have to co-operate - which is sometimes a challenge.


Although in Scotland they have a different system, which also seems to work.

tomryan89

I bought a a at with 86 years left on the lease. Didn't think it was a big deal until I attempted to sell.

Absolute, complete and utter nightmare.

Don't do it, you will regret it.

Ask the seller to extend or walk away.

Annie_Clark

The cost of extending the lease is huge if there are less than 80 years left on the lease - we're talking a couple of tens of thousands, not just thousands. Read about "marriage value". Also, you might struggle (even now) to find a lender if you need a mortgage.

General advice is not to allow the lease to drop below 80 years, and start the lease extension process at 85 years or so. I bought leasehold and don't have an issue with it. I'm currently with 92 years left, I have plenty of time to either sell or extend the lease.

HeyBear

Thanks for all the advice guys, really appreciate it. You've affirmed how I was feeling on the matter based on the small amount of research done.

I spoke to another of the flat owners today and I don't think he was even aware of these extra costs that mount up with leasehold properties, thought it would be a non issue until as little as 30 years remaining. I doubt the seller is either.

Pretty scary to think of how many other leaseholders might be living in ignorance. Do estate agents/ solicitors just skirt over the issue unless asked specific questions until the unfortunate owner that has the property under 80 years get's stung?

I'll have a talk with the current owner and go from there, don't think it's going to happen at this point though. I imagine it'll get snapped up as the area is quite desirable. With house prices rising here, these flats seem like a pretty good deal on the surface. Guess the problem will be pushed aside for another day in favour of a quick sale...

smem18

Do not do it unless the seller will extend the lease before the sale. A flat with 80 years or less left on the lease is barely worth anything as it will cost tens of thousands of pounds to extend the lease! You will not be able to sell it further down the line and no one will be able to get a mortgage on it. Estate agents can attempt to sweep low leases under the carpet but this would always come out before the sale completes because it will be in the contract and the solicitor will always pick up on it. It's not something you'd be able to hide from an unsuspecting buyer - lease terms are spelt out clearly in contracts which you read before exchanging. It might sound like a good deal but it's not with a lease like that