Shared Ownership Lease

Rachg653

I am in the process of buying an 80% share of shared ownership flat. I have found out that there is 83 years left on the lease. I have asked the housing association if I can extend the lease and how much this would cost, currently awaiting their response. This isn't going to be my forever home and I have only gone with a 2 year fixed mortgage for now, but I worry that if I want to remortgage in 2 years time that this may be difficult with the lease being around 80 years. Some people have told me 80 years is OK and 70 is the minimum but if I don't remortgage and sell in around 2-3 years, would this be harder to sell with 80 years left? 
Or would it be better for me to pay to renew the lease now before it reaches 80 or below, as I've heard the less the lease length the more expensive it will be. 
I hadn't factored in such a cost such as renewing a lease, but I feel I will be forever worrying about staying there longer than more than 2-3 years if I don't. 
I just want to figure out is 80 years would still be a reasonable length to sell/remortgage or if it would dramatically lessen the value of the flat when look to sell. 

eddddy

In your position, I think I'd want to know more about the relationship between extending the lease and staircasing.

For example,

• If you pay to extend the lease, it would normally increase the value of the flat
• So if the flat is more valuable, does that mean staircasing (i.e. buying the last 20% of the flat) will now cost you more?

i.e. You've paid out a chunk of cash to extend the lease, and the result is that you've made staircasing more expensive - either for yourself or for a future owner.

So is it better to invest any spare cash you have in staircasing first, while it's cheaper - and then extend the lease later, when you're nearer (or having reached) 100% ownership?


(There' a bunch of leasehold reforms under discussion by Government at the moment which include giving shared ownership leaseholders more rights with lease extensions etc, so maybe that will produce clearer rules etc. But it may be some years before they become law, if at all.)

princeofpounds

Do not buy this property without absolute clarity on how you will be able to extend the lease and (roughly) what it will cost.

This is one of the 'traps' in shared ownership. Often they were sold on e.g. 90 year leases, and the leaseholder has no right to statutory lease extensions, unlike most normal flat owners.

So once you get to 80 years you are dependent on the whim of the freeholder to permit an extension, and many have a policy saying you cannot do so unless you stair case to 90-100% ownership. Which is obviously impossible for many people. So they end up with flats that are hard, and eventually impossible, to remortgage. They are then force into paying standard rates for mortgages, which often destroys or greatly impedes their ability to save and staircase further.

Rachg653

Thank you both for your comments 

I am unsure if I will be able to afford to staircase to 100% - that would be the best option if I could but I went with shared ownership as I couldn't afford flat/house prices in the area on a single salary. 

I hope someone from the housing association gets back to me tomorrow so that I am able to find out if it is possible to extend the lease and roughly how much it would cost.
I want this in writing to confirm all the details before still going ahead 

Rachg653

princeofpounds said:

Do not buy this property without absolute clarity on how you will be able to extend the lease and (roughly) what it will cost.

This is one of the 'traps' in shared ownership. Often they were sold on e.g. 90 year leases, and the leaseholder has no right to statutory lease extensions, unlike most normal flat owners.

So once you get to 80 years you are dependent on the whim of the freeholder to permit an extension, and many have a policy saying you cannot do so unless you stair case to 90-100% ownership. Which is obviously impossible for many people. So they end up with flats that are hard, and eventually impossible, to remortgage. They are then force into paying standard rates for mortgages, which often destroys or greatly impedes their ability to save and staircase further.

I heard back from the housing association today to say I am unable to renew the lease until I buy 100% of the property. 
I dont know if I will be able to do that in the next 2-3 years, so now I have to weig up if I only stay there 2-3 years and the lease gets to 80 years, or I pull out now (which I really don't want to have to do) but will I really struggle re-selling it when the lease is 80 years? 

princeofpounds

Rachg653 said:

princeofpounds said:

Do not buy this property without absolute clarity on how you will be able to extend the lease and (roughly) what it will cost.

This is one of the 'traps' in shared ownership. Often they were sold on e.g. 90 year leases, and the leaseholder has no right to statutory lease extensions, unlike most normal flat owners.

So once you get to 80 years you are dependent on the whim of the freeholder to permit an extension, and many have a policy saying you cannot do so unless you stair case to 90-100% ownership. Which is obviously impossible for many people. So they end up with flats that are hard, and eventually impossible, to remortgage. They are then force into paying standard rates for mortgages, which often destroys or greatly impedes their ability to save and staircase further.

I heard back from the housing association today to say I am unable to renew the lease until I buy 100% of the property. 
I dont know if I will be able to do that in the next 2-3 years, so now I have to weig up if I only stay there 2-3 years and the lease gets to 80 years, or I pull out now (which I really don't want to have to do) but will I really struggle re-selling it when the lease is 80 years? 

Well you dodged a bullet there then (though your solicitor should have talked you through all this, if they have had time to look at things). 

Yes, you will struggle to sell it at a normal valuation when the lease gets to 80 years. It will be cash buyers only.

If you do buy it, and do not extend the lease before 80 years, then there will be a step up in the cost of any lease extension (on top of the staircasing of course) to account for 'marriage value'. The pace of lease extensions getting more expensive as time goes by will also increase, although not accelerating that quickly at first. 

Rachg653

princeofpounds said:

Rachg653 said:

princeofpounds said:

Do not buy this property without absolute clarity on how you will be able to extend the lease and (roughly) what it will cost.

This is one of the 'traps' in shared ownership. Often they were sold on e.g. 90 year leases, and the leaseholder has no right to statutory lease extensions, unlike most normal flat owners.

So once you get to 80 years you are dependent on the whim of the freeholder to permit an extension, and many have a policy saying you cannot do so unless you stair case to 90-100% ownership. Which is obviously impossible for many people. So they end up with flats that are hard, and eventually impossible, to remortgage. They are then force into paying standard rates for mortgages, which often destroys or greatly impedes their ability to save and staircase further.

I heard back from the housing association today to say I am unable to renew the lease until I buy 100% of the property. 
I dont know if I will be able to do that in the next 2-3 years, so now I have to weig up if I only stay there 2-3 years and the lease gets to 80 years, or I pull out now (which I really don't want to have to do) but will I really struggle re-selling it when the lease is 80 years? 

Well you dodged a bullet there then (though your solicitor should have talked you through all this, if they have had time to look at things). 

Yes, you will struggle to sell it at a normal valuation when the lease gets to 80 years. It will be cash buyers only.

If you do buy it, and do not extend the lease before 80 years, then there will be a step up in the cost of any lease extension (on top of the staircasing of course) to account for 'marriage value'. The pace of lease extensions getting more expensive as time goes by will also increase, although not accelerating that quickly at first. 

My solicitor told me the wrong information, I was told via solicitors that I had 138 years remaining. This was also what the surveyor sent for mortgage offer. This information may have been the lease for the whole block of flats!? I have no idea where they got that information from, but it's definitely 83 years remaining. 

I desperately wanted this flat and feel gutted now I have got this far, but the sick feeling I have about taking on such a risk, or knowing I only have 2 years max to stay there hanging over me constantly. 

My mortgage lender has said they would lend still at 83 years and they would go as far as 70 years, so there are lenders out there that seem to lend to shorter leases but I guess that depends on other people's circumstances if I sold in a couple of years time?