Short lease on a property for sale

ritani

I have had a search through the forums and have gathered some useful information on short leases, thank you.
I’m looking at a property with a 71 year lease which is empty. The EA has said the vendor will consider extending the lease at the buyers cost however they do not know how much it will be so initial chats are just a guesstimate. 
Apparently the cost to the vendor to enquire about an extension is about £500 and they are not willing to do this due to lack of funds.
The EA is reluctant to engage with my enquiries as he thinks it’s too complicated.
The guesstimate for the lease extension added to the price of the property is way overvalued I think (agent agrees too).
can anyone advise how I would be able to find out the lease extension cost in order to proceed?

I know I could extend the lease myself after 2 years but I want to ensure I reflect this if I decide to make an offer.

Thank you in advance.

greatcrested

https://www.lease-advice.org/calculator/

Timotei75

I found the lease calculator on the lease advisory service we site to be pretty accurate.  You will need to know the current ground rent for the calculation. 

blue_max_3

Have no idea the values, but I would be very surprised if it were only £500. Less than 80years has marriage value added. I think the seller is pretending not to understand, so you'll buy. EG, £200,000 with £25 ground rent ending in 01.03.2091 is between £18,000 and £19,000!

eddddy

ritani said:

The guesstimate for the lease extension added to the price of the property is way overvalued I think (agent agrees too).
can anyone advise how I would be able to find out the lease extension cost in order to proceed?

I know I could extend the lease myself after 2 years but I want to ensure I reflect this if I decide to make an offer.

In simple terms, there are 2 ways to extends a lease...

• The statutory route
• The informal route

See: https://www.lease-advice.org/article/lease-extension-of-leasehold-flats-the-two-routes/

If the freeholder is asking for £500 up front - that sounds like the 'informal route'.

There are no rules with the 'informal route'...

• The price (and terms)  are whatever the leaseholder and freeholder agree on
• You can do it at any time - there's no 2 year requirement
• The fees can often be less than with the statutory route
• But neither the leaseholder nor freeholder can force each other to go through with it - either party can back out until contracts are signed
• And 'clever' freeholders sometimes rip-off naive leaseholders
• It might be possible for you to get a lease extension on completion of your purchase - which will make getting a mortgage much easier. But that requires a very cooperative freeholder.

With the statutory route

• You have to own the property for 2 years - but that can be avoided by the seller can start the process before selling, and then you finish it
• Typically, the freeholder cannot refuse to extend the lease
• It takes 6 to 18 months to complete the process
• The fees are higher (maybe £4k+)
• You have to find a mortgage lender who is prepared to lend on a property with a 71 year lease
• You'd probably need cash to pay for the lease extension - unless you're able to re-mortgage at short notice

eddddy

blue_max_3 said:

Have no idea the values, but I would be very surprised if it were only £500. 

The £500 would be the fee for a valuation.

I.e. The leaseholder pays the freeholder £500 in order for the freeholder to provide a price for the lease extension.

(And the freeholder might take the £500 and quote a stupidly expensive price.)

At the very least, the leaseholder should ask the freeholder who would do the valuation - it should be a RICS lease extension valuer.

ritani

blue_max_3 said:

Have no idea the values, but I would be very surprised if it were only £500. Less than 80years has marriage value added. I think the seller is pretending not to understand, so you'll buy. EG, £200,000 with £25 ground rent ending in 01.03.2091 is between £18,000 and £19,000!

Thanks blue Max and timotei.
the EA is saying it will be £500 fee just to enquire about the cost to extend the lease and the vendor isn’t planning to do this.

EA reckons it will be about £15-£18k so your figure seems about right even tho they haven’t told me the current ground rent!
I’m hesitant to get involved unless I get a confirmed cost and how to do so myself.
thanks again.

eddddy

ritani said:
I’m hesitant to get involved unless I get a confirmed cost and how to do so myself.

thanks again.

So realistically, you have to say you want a lease extension on completion.

That makes it a 3 way negotiation between you, the current leaseholder, and the freeholder.  The freeholder would need to be very cooperative, and the EA would need to be very competent, and you'd need a solicitor with suitable experience.

blue_max_3

It might be a good time if the freeholder wants a bit of ready cash. But you either take the view you'll live there for the rest of your days or offer considerably less than it might potentially cost. Seems a big headache to get involved with if you ask me.

edgex

Is this a flat? If so, surely you'd also want to know the service charge etc, which the seller should have passed to the agent.
If it's a house, why wouldn't you be looking at buying the freehold?

AdrianC

ritani said:

I have had a search through the forums and have gathered some useful information on short leases, thank you.
I’m looking at a property with a 71 year lease which is empty. The EA has said the vendor will consider extending the lease at the buyers cost however they do not know how much it will be so initial chats are just a guesstimate. 
Apparently the cost to the vendor to enquire about an extension is about £500 and they are not willing to do this due to lack of funds.
The EA is reluctant to engage with my enquiries as he thinks it’s too complicated.
The guesstimate for the lease extension added to the price of the property is way overvalued I think (agent agrees too).
can anyone advise how I would be able to find out the lease extension cost in order to proceed?

I know I could extend the lease myself after 2 years but I want to ensure I reflect this if I decide to make an offer.

Thank you in advance.

Do you need a mortgage to buy it? If so, you'll almost certainly have to wait until the lease is extended...

If not, then you have the choice as to whether to do it before or after the sale. Either way is going to cost pretty much the same, bar the difference between 69 and 71 yr marriage value. The process will be the same, but more hassle before sale - with added risk of the vendor suddenly deciding they might not want to sell any more...