Buying a home with 82 years left on lease

FataVerde

Hi, I want to put an offer on a flat in good condition, but it has only 82 years on the lease. The flat was priced similar to others in this category at over £425,000, ground rent of 200 per year and it is from around 1900 in London. The current owners have only owned it for a year so they can neither apply for an extension nor invoke the 42 clause. I checked house records and it has indeed been bought last year in May. Apparently, they need a quick sale/move because of a family emergency. 

1. How much is the lease extension going to cost me?
2. Any idea how long the request for extension takes? I'm worried what can happen if the whole purchase process takes long and might leave me with short of 2 years (say 1y and 11 months) to apply.
3. Any questions I need to ask the vendor/EA about this? Or any aspects I should be wary about?

AdrianC

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

Assuming peppercorn ground rent, £6-9k, not much change between 80 and 82 years left.
Once it comes under 80 years, though, marriage value becomes an issue and it rockets up to £26-27k at 79yrs.

NameUnavailable

There's nothing to stop the vendor approaching the freeholder now and asking for a lease extension. They can potentially agree a price/terms and get a commitment that you can take it up when you complete.

The risk is that you otherwise won't be able to get a statutory extension until the marriage value becomes payable.

Also the price or your offer should reflect the fact that it has a short lease, and you may find you have to search around for a lender if you need a mortgage.

FataVerde

NameUnavailable said:

There's nothing to stop the vendor approaching the freeholder now and asking for a lease extension. They can potentially agree a price/terms and get a commitment that you can take it up when you complete.

I didn't know they can approach the freeholder to ask for a lease extension. Can they do this if they only owned the flat for 1 year? They bought it in May 2020.

eddddy

FataVerde said:

NameUnavailable said:

There's nothing to stop the vendor approaching the freeholder now and asking for a lease extension. They can potentially agree a price/terms and get a commitment that you can take it up when you complete.

I didn't know they can approach the freeholder to ask for a lease extension. Can they do this if they only owned the flat for 1 year? They bought it in May 2020.

Yes - they can ask at any time. You'll be able to ask as well, if/when you buy the flat.


But the freeholder might say "no", or might ignore the question, or might ask for any price they like - e.g. £10k or £20K or £30k or £50k.


The freeholder might work out that they are in a very strong position - i.e. current owner can't get a statutory extension yet and you can't get a statutory extension until lease drops below 80 years. So the freeholder might see an opportunity to ask for big money.

AdrianC

FataVerde said:

NameUnavailable said:

There's nothing to stop the vendor approaching the freeholder now and asking for a lease extension. They can potentially agree a price/terms and get a commitment that you can take it up when you complete.

I didn't know they can approach the freeholder to ask for a lease extension. Can they do this if they only owned the flat for 1 year? They bought it in May 2020.

There's a difference between a statutory extension (price as per calc, 2yr ownership, +90yr, peppercorn ground rent) and a discretionary one (whatever you agree between you).

FataVerde

This might be a strange questions as I'm very new to the process but how are lease years calculated, from 1st of Jan or the month of last extension?

firsttimesellerldn

I would be extremely wary of buying this flat without the lease already having been extended. You’d be putting yourself in a very vulnerable position. Buying flats isn’t a quick process generally.  If the freeholder is amenable to an informal extension then the current owners should sort that out, although be aware that freeholders can try and slip onerous increase clauses in as part of the process so it’s not straightforward. It’s a little strange that they  bought a flat where the lease is so close to 80 years and then want to sell if so quickly. Sure, emergencies happen but I’d be a little suspicious. 

AdrianC

FataVerde said:

This might be a strange questions as I'm very new to the process but how are lease years calculated, from 1st of Jan or the month of last extension?

The lease will have a start date, not just a year.

FataVerde

firsttimesellerldn said:

I would be extremely wary of buying this flat without the lease already having been extended. You’d be putting yourself in a very vulnerable position. Buying flats isn’t a quick process generally.  If the freeholder is amenable to an informal extension then the current owners should sort that out, although be aware that freeholders can try and slip onerous increase clauses in as part of the process so it’s not straightforward. It’s a little strange that they  bought a flat where the lease is so close to 80 years and then want to sell if so quickly. Sure, emergencies happen but I’d be a little suspicious. 

They bought it a significantly discounted rate, somewhere at £35-45,000 less than similar properties. This makes me wonder if they did not now realise the price of extension is significantly higher than they expected and are trying to pass on this cost to someone else.

martindow

FataVerde said:

Apparently, they need a quick sale/move because of a family emergency.

This would make me a little uneasy.  It may be true, but someone leaving after only a year will inevitably raise questions with buyers.  The vendor would need to find some vague but plausible reason like this if they have discovered a major problem with their flat.