Oh no! Not another lease extension question

livalicious

Right, i'll try to keep it short. FTB's, interested in a 2 bed maisonette in SE London, on the market for £195 000. Vendor has moved abroad, wants to get rid asap, and is leaving all the furniture (not all of it from ikea, some really nice stuff in there). Lovely location, nice garden, off-road parking, i.o.w ideal for us.

Only snag, has a 52 year lease, vendor willing to drop price to £175 000 as the EA said will cost about 18 to 20 grand to extend lease to 99 years.

Would this be something you would buy or would u run for the hills? Really confused, absolutely love this property but dont have the foggiest about whether we would be doing the right thing or not.

Help anyone. Please.

carli_h

I suggest if you are taking out a mortage that you check your lendor will provide you with a mortgage taking into account the length of the lease.

It can be very expensive extending a lease with less than 80 years to run. Before make a commitment I would suggest that you ask that the vendor to supply a costing from the leaseholder on actually how much it will cost to extend the lease and how it will effect the ground rent and any other associated costs. They may not do this until you make an offer.

Unless the vendor is prepared to start extending the lease during the sale, I believe (but am sure I will be corrected if not) you are unable to extend unless you have owned the property for two years. It will be difficult to sell the property on if it wasn't extended.

I would check these things out first, then make a decision and if it's affordable there's no reason why you shouldn't purchase it.

livalicious

thanks carli-h.

Our mortgage advisor will be looking further into the mortgage side of things tomorrow. He did say that we might be able to get a lender if we possibly get an interest only mortgage (and make overpayments to pay off some of the capital as though it were a repayment mortgage) or reduce the mortgage term.

The EA has said the vendor is not willing to extend the lease, and we are aware that we would have to own the property for at least two years before we can extend the lease. We definitley would want to extend it to at least 99 years as we know it would be extremely difficult for us to sell on. We thinking that we would be able to save up at least £400 pm for the next two years towards the costs of the extension, and remortgage in two years or so to make up the difference.

Is there anything else we may be missing or need to know. I want to make sure we have covered all bases before we go in with an offer?

Doozergirl

I'd be very worried about the exact amount. It could easily be more than £18-20,000 I think that's going to be the minimum

You will be lucky to find a decent mortgage at 52 years. I *think* the most flexible ones are where you need 25 or 30 years on the lease after the term of the mortgage finishes, so I can understand where your broker is coming from on the IO front as I assume repayments are the same regardless of the length of the term? What he would do is set you up with something shorter than the normal 25 years in order to get past that rule.

Do you know when they bought the flat? Assuming they have modern furniture, with some of it being from Ikea, it doesn't sound like they've owned it for a long time and let it run down

What you absolutely need is a proper quote/valuation from the freeholder before you even think to proceed. This is definately the sort of property that would normally be reserved for auctions or nutters like me

You can renew the lease before two years with the freeholder's permission. After two years you can force the freeholder to extend the lease by another 90 years.

livalicious

Thanks Doozergirl,

Apart from worrying about getting a mortgage lender with a decent rate for this property, we also worried about whether the actual cost to extend would exceed what the EA quoted. I will definitley get on to the EA about trying to get actual costing/quote from the freeholder, hopefully we might be able to get this before putting in any offers (though very much doubt that).

I looked on nethouseprices and the flat doesnt show on there at all, so im presuming (or is it assuming ) that the flat was bought before 2000. Is there any other way i could check? Ah yes, ask the EA.

This is looking more likely that we should let this one go, far too much for my little ftb brain to handle. But id like to think we tried our best and looked at all avenues to get this property. And i thought house-buying was supposed to be fun :rolleyes:

Doozergirl

I'd be very careful with what an EA says. They do not value lease extensions as part of their jobs. It should be done by a specialist surveyor - they don't all do it.

It will be recommended to any buyer by their solicitor that they obtain a proper quote for the extension. You can have your own one carried out, but you don't know how near to the freeholders one it will be.

I wouldn't do it without the available cash to extend. If you ever needed to move quickly, I should think you would normally be limited to selling at auction. It certainly wouldn't be a quick process to sell on the open market.

do_it_today!

Hi Livalicious :hello:

Contact the Leasehold advisory service https://www.lease-advice.org or 0207 374 5380. they can give some advice and send you an info pack about lease extensions - which contains examples as to how the premium is worked out along with a list of (not reccomendations) surveyors and solicitors who do specialise in lease extension

livalicious

Hi do it today! :hello:

Thanks for the number, i will give them a ring tomorrow. (that smilie made me smile )

Thanks again Doozergirl for all your advice, much appreciated x

cattie

Just to give you an indication, I was considering buying a flat with a lease of either 52 or 57 years earlier this year (can't remember exactly which length it was now).

Vendor had enquired about lease extension & was quoted in the region of £42k with all legal work added. :eek:

livalicious

Thanks cattie, £42K.... :eek: zoiks!!

Following a discussion with a Lease advisor and our mortgage broker, and general comments from friends and from this forum, we have decided not to offer on this property.

Im absolutely gutted, but i think we would be in way over our heads with this one. Buying a house is stressful enough without that extra worry. Oh well, onwards and upwards!

Richard_Webster

I've just done a quick calculation on a spreadsheet I have (no guarantees) and a figure of about £31K comes out!

As Doozergirl implies you would have to have a 21 year mortgage if you went a big lender such as Abbey that does 30 years + mortgage term but some lenders, e.g Standard Life Bank want 40 years + term and others (e.g. Bristol & West/Bank of Ireland) want 70 years regardless of length of mortgage.

If you think that £195K is about right for other flats in the area similar to this with longer leases then I'd offer about £155K and defy the seller to prove the lease extension will cost less. Who else is he really going to sell it to other than a cash buyer? He may get an offer from someone who doesn't understand the problem, but all that's going to happen is that a month later they will pull out because they can't get a mortgage or they get a mortgage but the solicitor points out that he can't meet the lender's requirements. (Lenders don't always ask about length of lease but assume solicitor will check this!). You make those poitns to the estate agents when submitting an offer!