Extending a short lease - pros and cons?

tevaka

My lease was already short when I bought my property 27 yrs ago.At the time I was at my financial limits and couldn't afford to extend it despite a very tempting offer.
Living in an up and coming area that extension would now be in excess of £50,000.
As my health isn't great my home could be what pays for later care home fees.
Do I use up the majority of my savings and investments to extend the lease and increase the property price or hope I die here and leave the sale to my younger siblings to worry about ?

I jest but any advice welcomed and/or links to previous threads on this topic.

Just to add I have no children or spouse.My current property value + assets already take me into inheritance tax reach.

Lease is now 52 yrs,neighbours have obtained 125 yr extensions from the same freeholder.
Also how much would legal fees add?

AdrianC

Advice would be more accurate with some numbers.

What length of lease is left?
What would the value of the property be with a long lease?

One thing you can be sure of - the discount on the value of an unmortgageably short property will be more than the lease extension cost, simply because of the paperwork and because of the restricted market. But who are you increasing that value for? If the property value plus savings will already provide for your foreseeable needs, then why leave yourself struggling without a financial cushion in the short term?

jonnygee2

As my health isn't great my home could be what pays for later care home fees

I can't see the value of extending. You will lose your savings and convert them into an increased property value. That significantly increases risk and decreases liquidity of this money.

If I were you I would keep the money in savings and investments.

eddddy

tevaka wrote: »

Lease is now 52 yrs,neighbours have obtained 125 yr extensions from the same freeholder.

If the neighbour's lease was extended to 125 years, that sounds like an informally negotiated lease extension.

i.e. The neighbour and the freeholder just agreed the price and terms between themselves.

The price and terms may have been good, or they may have been bad. (Some freeholders will rip-off naive leaseholders.)

The other approach is a 'Statutory Lease Extension' - the terms and the formula for calculating the price is specified by law.

You should always 'make a profit' if you do a statutory lease extension.

Here's a calculator that will indicate what a statutory lease extension might cost: https://www.lease-advice.org/calculator/

tevaka

AdrianC wrote: »

Advice would be more accurate with some numbers.


What length of lease ?
52 yrs as stated above.

What would the value of the property be with a long lease?
Similar properties on same street going for £300 -350k.Mine currently valued at £260k and prices rising.

One thing you can be sure of - the discount on the value of an unmortgageably short property will be more than the lease extension cost, simply because of the paperwork and because of the restricted market. But who are you increasing that value for? If the property value plus savings will already provide for your foreseeable needs, then why leave yourself struggling without a financial cushion in the short term?

Thats why I'm asking ! Weighing up the odds based on advice given by those who might know more than a financial novice.

tevaka

eddddy wrote: »

If the neighbour's lease was extended to 125 years, that sounds like an informally negotiated lease extension.

i.e. The neighbour and the freeholder just agreed the price and terms between themselves.

The price and terms may have been good, or they may have been bad. (Some freeholders will rip-off naive leaseholders.)

The other approach is a 'Statutory Lease Extension' - the terms and the formula for calculating the price is specified by law.

You should always 'make a profit' if you do a statutory lease extension.

Here's a calculator that will indicate what a statutory lease extension might cost: https://www.lease-advice.org/calculator/

Thanks ! I have no intention of letting this particularly crafty freeholder rip me off hence seeking advice widely before I choose my options. Great link

tevaka

jonnygee2 wrote: »

I can't see the value of extending. You will lose your savings and convert them into an increased property value. That significantly increases risk and decreases liquidity of this money.

If I were you I would keep the money in savings and investments.

And this is why I came to the forum.Another factor I forgot to mention. My financially astute brother is my POA along with my sister for Finance and Property should I lose capacity.Let them do all the worrying later while I enjoy my current home.

AdrianC

tevaka wrote: »

What length of lease ?

52 yrs as stated above.

What would the value of the property be with a long lease?

Similar properties on same street going for £300 -350k.Mine currently valued at £260k and prices rising.

So the marriage value will be rising, too, and more than simply by the reduction in lease.

Assuming £350k, peppercorn ground rent, outside prime central London, then the statutory calculator reckons £60k or so. It won't calculate for shorter than 50yrs - because the value becomes rapidly more impaired. £260k impaired value would give you £30k or so return on the extension.

So, yes, £50k is good value, depending on the terms of the new lease.

But that's assuming you've figured out an answer to the "is it worth it for me?" question. You don't specify your age or the vague direction of your health conditions, but if you're thinking much more than 10yrs ahead, then you will find the property very hard to sell at any kind of non-nominal value. But, as I say, it's all down to your own attitude to timescale and whether you'd prefer the cushion now or a better bequest to whoever...

tevaka

eddddy wrote: »

Here's a calculator that will indicate what a statutory lease extension might cost: https://www.lease-advice.org/calculator/

That calculator has shown beyond doubt that I don't have the capital to extend the lease.

Question answered in full now.

tevaka

AdrianC wrote: »

So the marriage value will be rising, too, and more than simply by the reduction in lease.

Assuming £350k, peppercorn ground rent, outside prime central London, then the statutory calculator reckons £60k or so. It won't calculate for shorter than 50yrs - because the value becomes rapidly more impaired. £260k impaired value would give you £30k or so return on the extension.

So, yes, £50k is good value, depending on the terms of the new lease.

But that's assuming you've figured out an answer to the "is it worth it for me?" question. You don't specify your age or the vague direction of your health conditions, but if you're thinking much more than 10yrs ahead, then you will find the property very hard to sell at any kind of non-nominal value. But, as I say, it's all down to your own attitude to timescale and whether you'd prefer the cushion now or a better bequest to whoever...

Thanks. I used the calculator and found the same as you stated.Checking back on my £50k figure it was from 3 years ago,time flies and so does gentrification.
My memory is starting to go as my mothers did which is part of my health concerns.


I'm 67 and have COPD,high blood pressure and osteoarthritis.Any of those could escalate in the next 10 yrs and force me out of my upstairs flat.

I'd prefer the cushion now I think.The will bequests to family and friends on my death is a bonus for them and none are the vulture types some families have.

tevaka

That was all very useful and I now feel I've got the answers I needed.

I don't know how to close a thread so if any mods reading this please advise.