Purchasing a flat with a 63 year lease

clarkeycat

I've been flat hunting for the past few months, and I've finally found a place I really like and would like to make an offer on.

The property's value is £450k - I will be paying about £300k of the purchase price with cash, and the remaining £150 with a mortgage.

However, there's an issue. The lease on the property is currently 63 years. The vendor is in the process of acquiring the freehold, along with the leaseholders of the others 2 flats in the property, and intends to extend the lease to 150 years, which is obviously a much better situation.

My fear is that if I wait for this to happen (which could take months), somebody else will make an offer and get the place. What are my options? Does it seem likely that I'll get a mortgage agreed under these conditions? Am I able to get the vendor to guarantee the lease extension prior to purchase?

I realise it's quite a complicated situation, so any thoughts are very welcome - first time buyer so I'm learning all this as I go along.

eddddy

clarkeycat wrote: »

My fear is that if I wait for this to happen (which could take months), somebody else will make an offer and get the place. What are my options? Does it seem likely that I'll get a mortgage agreed under these conditions?

It's very, very unlikely that a lender would offer a mortgage on this property.

A cash buyer might come along, looking for a bargain - who's prepared to buy a flat with a 63 year lease at a very low price.

Is the seller desperate, might they accept a low price - or rather wait until the extension is done and get a better price?

clarkeycat wrote: »

Am I able to get the vendor to guarantee the lease extension prior to purchase?

In theory - yes.
In practice - probably not (the seller's solicitor would advise them not to). There are too many things that could go wrong along the way.

In fact, the big risk for you is that you wait many months for this to happen, and find that the lease extension just doesn't happen at all.

m0bov

You can have the lease extended or renewed upon completion.

NineDeuce

clarkeycat wrote: »

I've been flat hunting for the past few months, and I've finally found a place I really like and would like to make an offer on.

The property's value is £450k - I will be paying about £300k of the purchase price with cash, and the remaining £150 with a mortgage.

The other issue is that you wont have enough money. £300k + £150 = £300,150. You are £149,850 short

da_rule

As the seller is not yet a freeholder, they could serve a statutory lease extension notice on the current freeholder. This will start the statutory process to add 90 years to the lease.


You would not be able to do this on completion as you have to have been a leaseholder for 2 years. However, assuming the seller has, he can start the process then assign it to you.


The things to be careful of are that you become liable for the freeholders legal costs and it will be the seller that will be suggesting how much to pay for the lease extension (although you could agree this between yourselves beforehand).

kingstreet

eddddy wrote: »

It's very, very unlikely that a lender would offer a mortgage on this property.

I did a 56 a few years ago.

A few lenders offer mortgage term plus thirty, so 25 + 30 worked. We bought the freehold a couple of years later.

clarkeycat

Thanks for the feedback everyone, much appreciated.

It's very, very unlikely that a lender would offer a mortgage on this property.

A cash buyer might come along, looking for a bargain - who's prepared to buy a flat with a 63 year lease at a very low price.

That is what I feared - it does seem like a very slim chance that I'd get a mortgage on this.

It's a slightly confusing situation. If I were in the vendor's position I would wait until the freehold has been transferred, and the lease extension was complete, then market the property. I'm guessing perhaps he is trying to drum up interest? As he must know that at this point, nobody would pay asking price for it.

Perhaps he's looking for a cash buyer to take it at a discount as you mentioned, though this wouldn't seem very profitable unless he's in a very dire situation, which he doesn't seem to be.

The things to be careful of are that you become liable for the freeholders legal costs and it will be the seller that will be suggesting how much to pay for the lease extension (although you could agree this between yourselves beforehand).

Thank you for flagging that - doesn't seem like a situation I want to be in.

I suppose I may be best off to keep looking, and put this on the back burner in the hope that the freehold/lease extension process moves forward to completion, then maybe I can get an offer in.