Shared Ownership Resale Purchase with 80 Year Lease Remaining

Slaked

Can anyone advise if this is something that may be concerning before I spend any money on surveys and legal advice?

I'm a first time buyer and I've had an offer accepted to buy 66% shared ownership flat resale. There are no restrictions on staircasing to 100% and there's no buy back clause when it comes to sell if I own 100%.

I asked how long the lease had left and they told me it was 99 years from Jan 2002 which puts it at 80 years from Jan 2001. 

I checked land registry transaction history and the last sale of the property was 2005 for £83500 which is £1000 more than the offer I've made on it. I'm wondering why in that time the owner either didn't staircase to 100% or extend the lease? 

Does anyone think there might be something to be concerned about here?

Thanks

MaryNB

I'd run a mile. You have no entitlement to have the lease extended until you staircase to 100%.  If you staircase to 100% and go down the statutory lease extension, at 80 years of a lease left you'll have to stump up the marriage value as well as the standard cost of extending it. 

If you don't extend the lease and you sell in a few years, once the lease goes below 70 years you can only sell to cash buyers, most lenders won't go near it. 

How does the asking price of the flat compare to the price of similar flats in the area? 

Slaked

MaryNB said:

I'd run a mile. You have no entitlement to have the lease extended until you staircase to 100%.  If you staircase to 100% and go down the statutory lease extension, at 80 years of a lease left you'll have to stump up the marriage value as well as the standard cost of extending it. 

If you don't extend the lease and you sell in a few years, once the lease goes below 70 years you can only sell to cash buyers, most lenders won't go near it. 

How does the asking price of the flat compare to the price of similar flats in the area? 

Thanks for the quick reply. The full value of £125k is cheap for the area, maybe £20-30k below average. 

MaryNB

Ah ok, yeah makes sense. Are you able to afford the cost of a lease extension plus marriage value? I guess it all depends if you have the funds to staircase and extend the lease, or are willing to accept the risk of having to sell to a cash buyer at a discount. 

Avoid any non-statutory lease extensions. I've read some horror stories online - freeholders are able to set whatever terms they like and some can be quite sneaky. Statutory route is much safer. 

Slaked

MaryNB said:

Ah ok, yeah makes sense. Are you able to afford the cost of a lease extension plus marriage value? I guess it all depends if you have the funds to staircase and extend the lease, or are willing to accept the risk of having to sell to a cash buyer at a discount. 

Avoid any non-statutory lease extensions. I've read some horror stories online - freeholders are able to set whatever terms they like and some can be quite sneaky. Statutory route is much safer. 

Thanks for your input I've emailed the EA to ask a few questions about it but in short I don't want to risk being on the hook for several thousand more pounds - that's why I'm buying Shared Ownership to start with. Looks like I'll probably start looking again 

tinytiddles

All current shared ownership leases are for 99 years (from new) but there is a piece of legislation coming in requiring the freeholder (usually a housing association) to extend them to 999 years without charge to the shared owner. Ask your solicitor about this - it isn’t law yet but it is coming. 

MaryNB

tinytiddles said:

All current shared ownership leases are for 99 years (from new) but there is a piece of legislation coming in requiring the freeholder (usually a housing association) to extend them to 999 years without charge to the shared owner. Ask your solicitor about this - it isn’t law yet but it is coming. 

I didn't realise a 99 year lease was standard for new shared ownership property, that's crazy! Why is the standard so short? 

Slithery

tinytiddles said:

All current shared ownership leases are for 99 years (from new) but there is a piece of legislation coming in requiring the freeholder (usually a housing association) to extend them to 999 years without charge to the shared owner. Ask your solicitor about this - it isn’t law yet but it is coming. 

It may be coming.
All the government have said so far is that they will be looking into bringing in new legislation at some unspecified point in the future. They haven't even got as far as drafting it let alone getting it passed - who's to say the idea won't get dropped after the next general election?