Lease extension on flat we're looking to buy ... PLEASE HELP

Estelle_bb

Hi everyone,

So I need some help on the situation. Quite a long story, me and my partner tried to apply for a mortgage but because of bad credit history we were declined 3 times so we were unable to buy a house ourselves. My dad has now stepped in and said he would buy a property for me and my partner. He wants it to be a maximum of £100,000 so we have a limited amount properties to look at but at the same time my dad is a cash buyer so that does help with making offers. We found a property for £90,000 but needs a lease extension as it only has 47 years left. The vendor is looking at doing a section 42 to pass on the right to us for us to be able to do lease extension. However we have no confirmation of how much the lease extension is going to be because it is lower than 50 years I can't use any online calculators and the vendor does not have the means to pay for a surveyor to come over and valuate the cost of the lease for the property. The only thing she's going off of is that her next door neighbour has only just renewed his lease within the past few months and it cost him around £17,000 including legal fees, but not too sure how much he had left on his lease.

Another problem is that when we were looking at the property and looking at making an offer for the property, other people have made an offer for the house for £105,000 but with the vendor to complete the lease extension and at the moment the vendor has accepted their offer. I have spoken to the estate agent at Purple Bricks and he has said that he has tried to get into contact with the freeholder unfortunately has not been able to talk to the freeholder. Originally the vendor was more inclined to sell the property to us as a cash buyer and us then having to deal with the lease but because it has been such a long time she is now looking at just carrying on sale with the other people. We have been looking for other properties but nothing else in the area for what we need and for that price. So on a bit of a tight schedule really.

Not too sure what to do as can't get a good estimate of how much the lease will be but don't want to go for it and find out it's going to cost my dad loads in the long run, any advice please ?

Thank you !!

seven-day-weekend

My son has a flat which has a value of about £85k, he is just in the process of renewing his lease which has 55-ish years left and the estimate including legals is £17k.

The shorter he lease, the more it will cost to renew.

Hope this helps.

Tom99

[FONT=Verdana, sans-serif]If the vendor is now planning to do the lease extension themselves then presumably they will have to take advise on how much to pay, in which case you can step in again and offer to take over if you want.[/FONT]
[FONT=Verdana, sans-serif]However your best bet will be to employ your own RICS surveyor to give you an estimate which will be a range of figure from best case to worst case.[/FONT]
[FONT=Verdana, sans-serif]If you do manage to resurrect the situation make absolutely certain that the S42 notice to be served by the vendor is valid because if you get it wrong you will have to wait 2 yrs before being able to serve another.[/FONT]

da_rule

How much do you want the property? If the seller can not afford to get a survey, why not offer to pay for one yourself on the understanding that:
1) The cost is deducted from the sale price; and
2) You see and approve the s.42 notice before they serve it on the freeholder.

Tom99

[FONT=Verdana, sans-serif]This calculator will cope with 47 yrs remaining.[/FONT]

[FONT=Verdana, sans-serif]https://www.freeholdcalculator.com/leasehold_extension.php[/FONT]

[FONT=Verdana, sans-serif]The key figure in a calculation with such a short term is the relativity %age between a 47 yr lease and new extended lease value.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]For 47 yrs the assumed relativity is 69% ie (if £90k is right for 47 yrs) that after the lease extension it will be worth £130,000.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]Assuming the ground rent is a fixed £100pa that would give a lease extension premium of £27,500 plus fees on top so £30,000+.[/FONT]

[FONT=Verdana, sans-serif]Please note that the 69% relativity is based on the outstanding term and the new extended lease value, not the figure you are paying.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]For example if the new lease is only worth £115,000 then you would still pay c £24,000 plus costs to extend the lease. Whether you paid £90k, £80k or £100k for the 47 yr lease would not make any difference.[/FONT]

strawberries1

Tom99 wrote: »

[FONT=Verdana, sans-serif]This calculator will cope with 47 yrs remaining.[/FONT]

[FONT=Verdana, sans-serif]https://www.freeholdcalculator.com/leasehold_extension.php[/FONT]

[FONT=Verdana, sans-serif]The key figure in a calculation with such a short term is the relativity %age between a 47 yr lease and new extended lease value.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]For 47 yrs the assumed relativity is 69% ie (if £90k is right for 47 yrs) that after the lease extension it will be worth £130,000.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]Assuming the ground rent is a fixed £100pa that would give a lease extension premium of £27,500 plus fees on top so £30,000+.[/FONT]

[FONT=Verdana, sans-serif]Please note that the 69% relativity is based on the outstanding term and the new extended lease value, not the figure you are paying.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]For example if the new lease is only worth £115,000 then you would still pay c £24,000 plus costs to extend the lease. Whether you paid £90k, £80k or £100k for the 47 yr lease would not make any difference.[/FONT]

Is there a special way to access this link? It's not opening here. https://www.freeholdcalculator.com/

Tom99

strawberries1 wrote: »

Is there a special way to access this link? It's not opening here. https://www.freeholdcalculator.com/

That website is not working at the moment...........

westernpromise

So from the vendor's perspective, he can either accept your bid of £90k and let you pay for the lease extension yourself, or he can organise it himself at his own cost, and definitely sell the property on for £15k more. Right?

If the latter is what he's decided to do, then obviously he's betting that it's not going to cost £15k to get the extension. If he thinks it's going to cost him only £10k to get it, he's £5k better off accepting the £105k bid (= £95k net sale price after the cost of the extension) than he is selling to you.

Personally I'd think it a brave decision to turn away a surefire sale while you faff about extending a lease to make a measly few k more. The only way it makes sense is if he thinks he's getting paid far more for taking on the risk and delay than it's worth. Maybe he thinks it's going to cost £1k and he's going to make £14k.

It boils down to what the extension will cost versus what having it will do to the value of the property. Where will you get £15k from if that does turn out to be the cost? That's £5k more than you have.

Also, if you and your bae split up and need to sell before you get the lease extension funded and sorted, you're potentially going to put yourselves into the position the vendor is currently in. This may be less than ideal.

eddddy

westernpromise wrote: »

So from the vendor's perspective, he can either accept your bid of £90k and let you pay for the lease extension yourself

<snip>

The post you're replying to is 5 weeks old - so I'd guess things have moved forward since then.

westernpromise

Yes, didn't notice. It would be interesting to know what happened though,

strawberries1

Tom99 wrote: »

That website is not working at the moment...........

Thanks Tom99!