Buying a flat with a short lease

40ish

I am in the process of buying a flat with a very short lease (57 years). It’s my own fault for not realising this initially. I am a cash buyer (with inheritance funds).
How do I go about finding out the cost of extending this lease (which I know I can only do once I have owned it for 2 years). What should I look out for?
I have purchased/am purchasing the flat through “Iam sold” and have already paid £6k fee to them. Would I have any rights to get my fee back and back out of the purchase as I am now panicking rather a lot!

Plus

MSE has a guide on lease extension:
https://www.moneysavingexpert.com/mortgages/extend-your-lease/

You might put the details into a calculator like this one to get an idea of costs:
https://www.lease-advice.org/calculator/

However, the leeway the freeholder has to decide whether to grant a lease extension and how much it will be depends on the situation - for example, more complicated if it's shared ownership.

IAM Sold appear to be an auction house - are you purchasing at auction? If not an auction, what was the fee for? Was the length of the lease stated on the particulars?

Are you able to ask the vendor to ask for a quote for an extension before you exchange?

Also to note that there's been a recent consultation to shake up leasehold, so it is possible the law may change in this area.

da_rule

You would probably only be able to back out if they have misrepresented the length of the lease.

There are calculators available online to give a rough estimate. For a more accurate indication you’ll need a valuer.

If the the person you are buying from has owned the flat for at least 2 years then they can serve the notice and assign it to you when you purchase it so you don’t have to wait.

eddddy

A few comments:

• You could ask the vendor to start the statutory lease extension process before completion (i.e. serve a section 42 notice). Then you don't have to wait 2 years.

• Or you can negotiate a price with the freeholder for a lease extension at any time - but the freeholder might ask for a ridiculous price

• If you back out, you will lose the £6k fee you've paid to iamsold, (unless perhaps you can show that they misrepresented something. E.g. They said that the lease was longer than it really was.)

Iamsold auctions are conditional auctions, so I guess you haven't exchanged contracts yet. Therefore, if you back out, your total loss will be the £6k 'reservation' fee. You won't be in breach of contract, so you cannot be sued for damages.

Pixie5740

40ish wrote: »

I am in the process of buying a flat with a very short lease (57 years). It’s my own fault for not realising this initially. I am a cash buyer (with inheritance funds).
How do I go about finding out the cost of extending this lease (which I know I can only do once I have owned it for 2 years). What should I look out for?
I have purchased/am purchasing the flat through “Iam sold” and have already paid £6k fee to them. Would I have any rights to get my fee back and back out of the purchase as I am now panicking rather a lot!

Is this I Am Sold's traditional auction or modern auction? Not that I'm sure it really matters because the reservation fee is non-refundable. You're supposed to do your own due diligence before bidding. Did the Buyers Information Pack day anything about the length of the lease?

Plus

Ah, I see IAM Sold use 'Modern Method of Auction', and the 6K fee is:
"A non-refundable fee paid by the Buyer to us to reserve a Property. This is in payment of our fees for conducting the conditional auction."

where the vendor pays no fees (ie the buyer pays them all upfront).

I'm not a lawyer, but I could only imagine you would get out of the fee in the case of misrepresentation. Was anything wrong in their information pack?

I can't say I'd be very thrilled with paying the fees upfront, especially when buying leasehold where there can be plenty of hidden pitfalls. (I bet they didn't provide a copy of the lease in the info pack, did they?)

40ish

Thank you everyone. I gave just fine knyo the online calculator and it’s guvjng me an estimate of around £20k for the lease extension. Sill question, but is thus the cost just for the flat I’m buying....or would thus be shared by the other flat owners?

40ish

Thank you everyone. I have just gone onto the online calculator and it’s giving me an estimate of around £20k for the lease extension. Silly question, but is this the cost just for the flat I’m buying....or would this be shared by the other flat owners?

Bossypants

40ish wrote: »

Thank you everyone. I gave just fine knyo the online calculator and it’s guvjng me an estimate of around £20k for the lease extension. Sill question, but is thus the cost just for the flat I’m buying....or would thus be shared by the other flat owners?

It would just be yours, as yours is the only lease you'll be extending. Now you know why the place was up for auction! Having said that, I've seen far more expensive lease extensions, it could be worse.

Edit: Also, don't forget about the ancillary costs, like survey and legals fees (which you will need to cover for both yourself and the landlord). That'll be on top of the £20k.

Plus

40ish wrote: »

Thank you everyone. I gave just fine knyo the online calculator and it’s guvjng me an estimate of around £20k for the lease extension. Sill question, but is thus the cost just for the flat I’m buying....or would thus be shared by the other flat owners?

Just yours. You can save on legal fees if all the leaseholders get together and extend en masse, but the calculation is done on the basis of the value of each flat and the ground rent, so the underlying price of extending a lease won't vary if it's done in bulk.

Tom99

Unless the existing owner has owned the lease for 2yrs and agrees to serve a section 42 Notice before completion and assign that notice to you, you will have to wait 2yrs.
You have to ask yourself why has the seller not extended the lease themselves and sold the property for far more money with a 147yr lease?
Is the price you will have to pay now fixed? How does it work?
In theory you should be getting a good deal at a low price because only cash buyers can bid and even some of them will be put off by this auction method of sale.
Unless you are overpaying now for the 57yr lease you should make a profit when you extend the lease be it now or in 2yrs time.