Buying flat with short lease but share of freehold

JoeStuart

Hi all!

The flat I'm buying has 65 years left on the leasehold. This is clearly very short, however it comes with share of the freehold. The house is split into two flats, with the freehold shared between the two. I have asked the seller to renew the lease before the sale, but they have refused (I guess they just don't want the hassle?).

Does it sound ok to go ahead anyway, as I should be able to renew the lease cheaply, as I would have share of the freehold?

Whats the worst that can happen here?

Thanks!

Joe

cloo

I'm not sure... remember that nothing about leasehold makes any sense whatsoever and it is filled with expensive pitfalls. OTOH, it might be fine. I'd ask solicitor's advice on this (though be aware that not all solicitors are very clued up on this) and/or speak to the Leasehold Advisory Service about what your position is here.

hazyjo

Do you need a mortgage? The lender might say it's too short (despite the SoF).

kirtondm

the other flat has 99 years on the lease so wants a payment to agree to redo your leasehold?

need to speak to solicitor

eddddy

JoeStuart wrote: »

Does it sound ok to go ahead anyway, as I should be able to renew the lease cheaply, as I would have share of the freehold?

It depends on the neighbour.

You need to find out exactly why the lease isn't being extended before you buy - I'd suspect some kind of feud between the two current joint freeholders.


If the neighbour/joint freeholder is being uncooperative, you might have to go for a statutory lease extension route.

You would pay the full price for the lease extension - but you'd probably get 50% of it back as a joint freeholder. Plus you might have to pay £3k or £4k in fees.

But it'll be difficult to get a mortgage on a property with a 65 year lease, and you'll probably need a big chunk of ready cash for the lease extension.

JoeStuart

Thanks for the replies!

Barclays have agreed to lend on this situation, so thats got to be a good sign.

The other flat has 990 years left on the lease.

Alter_ego

I'd be asking the other leaseholder why the disparity between the leases. Also how is the freehold held. It can not be in joint names. Is it held by a company where leaseholders have shares?

JoeStuart

Good point about the disparity. Yeah there's a company that owns the freehold, and the owners of the flats are directors in the company. As part of the purchase I'd be taking the place of the current owner

economic

JoeStuart wrote: »

Thanks for the replies!

Barclays have agreed to lend on this situation, so thats got to be a good sign.

The other flat has 990 years left on the lease.

If the other is 990 years and yours is 65 years, if/when you extend the lease you will pay the market price to the company that owns the freehold i.e. you will pay yourself half os the market value and the other half will go to the other leaseholder (assuming the shares are split 50-50).

So in summary the cost of extending the lease will be half of the market price of the extension. you should factor that in in your purchase price of the flat. your lender would be ok if you have enough LTV despite the short lease.

don't forget you will have to pay marriage value too which can be quite a bit.

Tom99

[FONT=Verdana, sans-serif]You will probably want to try and reach a friendly agreement with the other owner for your lease to be 999 yrs also, say with one agreed surveyor to determine price.[/FONT]
[FONT=Verdana, sans-serif]If you follow the full statutory route with each party having a surveyor, who then may not agree and need to negotiate, you will end up paying all of this extra cost which could otherwise be split between you both so that you both get a better deal.[/FONT]

JoeStuart

@economic

Thanks!

> when you extend the lease you will pay the market price to the company that owns the freehold

Is it mandatory to pay market price and marriage value? Or is it possible to come to an agreement between myself (share of the freehold) and the other person who shares the freehold to pay a much lower fee?