Lease extension, what do we do?

AdrianC

Skippy13 said:

Thanks for the replies.  The problem with waiting is we really want to move.  I also begrudge the freeholder every penny of the money so we're between a rock and a hard place!

Don't choose to die on a hill of principle...

It's very simple if you're planning on selling.
Will spending £42k make a difference of more than £42k to the sale price? Yes or no?
If yes, do it. If no, don't do it.
(BTW, the answer is almost certainly a mahoosive "yes" with bells on.)

The other question that arises, of course, is how you've got to this situation...
When did you purchase the property? You must have been well aware of the short lease for quite some time...
If you bought it with a mortgage, probably 30 years or more...
If you didn't buy with a mortgage, but were a cash buyer, did you buy below market value because of the short lease...? 

Why can't the government give more information rather than dangling a carrot?!

They will, when there is more information.
The government can't just wave a hand and <ping> legislation arises!
They publish their intention to introduce legislation, then (if they don't quietly forget all about it) the bill goes through all sorts of drafts and amendments on its tortuous way through both houses of parliament. At the end, the legislation (if it doesn't get forgotten or squashed) may bear no relation to that initial intention.
THAT's the point at which they can give more actual factual information...

Skippy13

To answer your questions: 
We purchased the property in 2007.  We didn't realise that the lease was classed as short.  Our solicitor didn't mention it and our mortgage was approved without an issue so we went ahead, paying market price.

The mortgage was paid off 3 years ago because of an inheritance but we didn't have enough to extend the lease as well and figured it made sense to clear the mortgage and have a roof over our heads (I will be 100 when it expires).

We have now got the money to extend the lease and will be getting the ball rolling ASAP as we want to move.  We have no interest in buying the freehold and I don't think it would be possible as our neighbour upstairs has only just extended her lease.  There are no communal areas so I don't think waiting for commonhold to come into play would make a difference.

starving_artist

AdrianC said:

 the bill goes through all sorts of drafts and amendments on its tortuous way through both houses of parliament. At the end, the legislation (if it doesn't get forgotten or squashed) may bear no relation to that initial intention.

I think this is a really important point.  Speaking as someone who really wants to see these reforms bring about a better deal for leaseholders, before anyone gets too excited there are no guarantees and a long way to go:  There is bound to be deep opposition from some quarters (ie. those with vested interests) for example to the removal of marriage value with very likely compensation in some other form introduced.

AdrianC

Skippy13 said:

We purchased the property in 2007.  We didn't realise that the lease was classed as short.  Our solicitor didn't mention it and our mortgage was approved without an issue so we went ahead, paying market price.

Wow. So it was only 67 years at purchase, the lender didn't object, and your solicitor never thought to mention it...?
And you're sure it was full market value, not just asking price, same as if it had a long lease...?

The mortgage was paid off 3 years ago because of an inheritance but we didn't have enough to extend the lease as well and figured it made sense to clear the mortgage and have a roof over our heads (I will be 100 when it expires).

Playing with the usual calculator now... https://www.lease-advice.org/calculator/
54 years to go, assuming peppercorn ground rent, £42k would suggest about £250k long-lease value. Right?
So three years ago, the extension would have been around £38k.
At your purchase, it would have been about £25k.
Marriage value gets expensive, rapidly... and the calculator doesn't go below 50 years remaining.

So, going back to "extend or sell as is" - if you work off that £250k value, would you get £200k for it short-lease? No, you wouldn't. Extend.

Skippy13

Yep, that's right, no one said anything.  We got a letter from the lender withholding £10k but no reason was given and when we contacted them we were told it was a mistake and the full mortgage amount was reinstated.  That was the only blip.

Looking at the sold prices for the road around that time it was definitely full market value.  I think £250k is about right now looking at other properties, although some have been a bit more.  

It's a shame we couldn't have extended 3 years ago but due to circumstances we had an interest only mortgage at the time and it was unlikely we'd have been able to switch to repayment so we decided it was better to get rid of the mortgage.

BTW thanks for not telling me we were stupid to buy as someone on another forum did!  We probably were but I didn't need to hear it!

princeofpounds

If what you say is true about not being informed of the implications of a short lease, then you may have a claim against the solicitor. Probably though you'll find it was buried in some leaflet they gave you as part of a huge bundle.

Also very weird the mortgage company didn't blink. Most lenders would not lend on such a property. Given the solicitor would have represented both of you, it suggests that they may not have informed the mortgage company (although who knows what the 10k retention was all about).

I wonder if the solicitor was under some kind of misapprehension here.

Skippy13

Sorry, I've only just seen this.  The solicitor is no longer practicing locally and we've been here 13 years now so I don't think we'd be able to claim now.  

We've bitten the bullet and instructed a solicitor and surveyor so we're going ahead with the statutory lease extension.  There's no point in waiting to see what might happen and then spending more.  It also means we'll be able to think about moving