To extend or not extend my lease

Tarostar

The questions: Should I extend my lease and should I pay for extending the lease for the part I don't own?

I've spent a lot of time researching lease extensions, been to lease-advice website, done my maths and even paid to have the cost of the lease extension valued. I currently have a lease of 82 years, I plan to live there ~4 years (as an investment) as it's a very small 1-bed in not the best of areas and me and my wife do not want to raise children there... The total value of the flat is 140K and I was told I should expect about £2500 to extend the lease, and then there is another £700-£1000 in administration fees to actually extend it.

However, I'm in a bit of a unique (I think) situation. I only own 50% of the flat, the rest being owned by a non-charitable housing association who is also the leaseholder. I've also just bought the flat and moved in only a month ago but the leasholder and 50% stakeholder has agreed to let me extend the lease even though this is usually only possible with 100% ownership and 2 years residency, since they mistakenly told me I could do so when I was buying it.

Still they insist I pay the lease extension cost for the value of the entire flat, not just the part I own. Effectively paying them for the 50% they own to extend their lease.

So considering I plan to live there maybe 4 years, and that when the lease reaches 80 years the marriage value will greatly increase the price of extending the lease, should I extend? Should I take it further that they want me to pay for their half as well or is this reasonable (if so, how)?

Basically when time comes to sell will I win or lose financially if I extend the lease and how much will it affect my chances to sell. I should add here that when we do sell, we have to price it according to an evaluation done by an independent, so the increased value of a longer lease only helps us to the extent that it makes it easier to sell or if the valuation increases due to the longer lease.

Any insight or tips on where I can go for either free or paid-for financial/legal help greatly appreciated.

Thanks!

MrShed

Can I suggest contacting PainSmith solicitors(a google should show them) they are experts in the field.

To be honest, this has some very serious legal complexities, and is by no means straightforward, and I would strongly recommend acquiring a solicitor.

Debt_Free_Chick

Well I can understand their stance - there is only one lease and you can't extend just a part of it.

Will there be any financial gain? For a longer lease, I would have thought so - but valuing it could be difficult. And, of course, in years to come any fall in property prices could wipe out any gain from the extended lease.

The only possible suggestion I can see, is that the HA agree to cut you more than 50% of any increase in value, attributable to the extension of the lease. The value could be a matter for the independent valuer and be binding on you both. For example, if the valuer says that the longer lease has added £10k to the value, then your agreement might be that you get 75% (or whatever you agree with the HA) of that, rather than 50% of it.

Worth a shot - although I doubt they'll agree.

Tarostar

Thanks to both of you. I do think we will need to find proper financial/legal advice, but I am just not sure where to find it for our particular situation. I don't want to pay for the services of a solicitor who can only tell me what I've already found out in my research. I will certainly check the solicitor suggested.

More importantly I'm not very keen on getting into some sort of legal tangle with the housing association. I'm very glad to be able to finally own (50% off) my own flat, but I have to think about if it makes more financial sense to extend the lease or not. Considering that exending it can easily cost me over £4000 once the final valuation is made and I own only £70K worth of the flat.

Anyone here have experience with the difference it can make to sell a flat with a 82 year long lease and a 78 year long lease or had difficulties with selling a flat with 75-79 year long lease? Equally anyone buying might have valuable input on this.

Doozergirl

There's no right answer.

I have sold property with the figure in the 70s. The subject was raised but I said the price reflected it and with prices rising rapidly, I actually panicked and dropped the price when the flat didn't sell in 2 weeks :wall:. When we bought the same property it was not even mentioned but we officially had the worst solicitor in the world at the time. Really.

You either spend out now on it, or you leave it and risk a buyer wanting the lease extension and then end up forking out more for it because it has run down past 80 years.

Some people will not take any issue with it, some people panic about it. It depends on the buyer you get. People on the whole don't really understand leases - you often get people on here who say they won't touch a lease less than 100 years and others who have actually allowed a lease to run out! Neither would be right, really.

EdInvestor

Tarostar wrote: »

Anyone here have experience with the difference it can make to sell a flat with a 82 year long lease and a 78 year long lease or had difficulties with selling a flat with 75-79 year long lease? Equally anyone buying might have valuable input on this.

Personally I wouldn't bother extending the lease at this point. Shorter leases can become a problem when the mortgage lenders start to get nervous, which is usually at 68 years. But with a part-owned flat, the length of the lease is hardly a major issue.

Tarostar

EdInvestor wrote: »

Personally I wouldn't bother extending the lease at this point. Shorter leases can become a problem when the mortgage lenders start to get nervous, which is usually at 68 years. But with a part-owned flat, the length of the lease is hardly a major issue.

Why do you think it's less of an issue with a part-owned flat?

I'm indeed very tempted not to bother, considering that it will cost me £4000, which means that I'll be on a very tight budget for at least a year. However, I really don't want it to come back to bite me in 4 years and therefore I'm trying to find out if extending the lease will be more of a boost on my finances in 4 years than the cost of doing so will be a break on it now.

Doozergirl

It will not increase the value. it will make it worth it's full market value. At just under 80 years, the value of the flat will be reduced by the cost of the lease extension usually. Buyers will either ask that you extend it or that you reduce the price by the cost, if they ask at all. It's like a good roof. It doesn't add value but they will want you to pay out for fixing it *if* their surveyor highlights one that needs repair.

Options are -
pay out while the extension is cheaper and get full value when you sell.
don't pay out and then lose the higher costs of extending after 80 years to your buyer.
don't pay out and wait/hope for a buyer who doesn't mind the length of the lease

Tarostar

Doozergirl wrote: »

It will not increase the value. it will make it worth it's full market value. At just under 80 years, the value of the flat will be reduced by the cost of the lease extension usually. Buyers will either ask that you extend it or that you reduce the price by the cost, if they ask at all. It's like a good roof. It doesn't add value but they will want you to pay out for fixing it *if* their surveyor highlights one that needs repair.

This is a very good way of putting it. Thanks, that actually makes it much easier to understand!

So either I gamble on finding the right buyer or I must pay now (paying the lease extension when <80 years is not an option). The spanner in the works is of course that I'll be selling through the housing association's network (if they cant find a buyer in 3 months I can sell it on the open market) and I have to do so at the price determined by an independent valuer. This means it will be easier for me to argue with any buyer that the lease is part of the package, but equally this might scare away many potential buyers...

Thus why I asked the previous poster why he thought extending the lease was of little issue for a part-owned flat.