Buying a flat with a short lease

chaoticbaker

I've found a flat that I like. It's very much a "project," needing a lot of work doing. However, it's in a great location and will be lovely flat once the work is done. 

The big snag is that it is a leasehold with a lease of 55 years. I wouldn't be able to buy it without a mortgage and I know that most lenders wouldn't go near it with such a short term. However, I've heard that it is possible to negotiate lease extensions with the freeholder at the time of sale and that lenders might be happy to lend in this situation. I was just wondering if anyone has experience of this and if it sounds feasible?

Thanks for your help.

NameUnavailable

The vendor could agree a price for a lease extension with the freeholder and you make that a condition of the sale (you pay the agreed price for the property and for the lease extension).

However you need to be wary of the freeholder slipping in some new clauses like a higher or doubling ground rent.

A statutory lease extension is usually better - you get 90 years added and ground rent is peppercorn. The vendor could initiate the process but I don't think lenders would agree a mortgage on that basis.

With only 55 years remaining the cost for either option is going to be significant. Have you enquired as to the options via the vendor and/or freeholder?

eddddy

chaoticbaker said:

However, I've heard that it is possible to negotiate lease extensions with the freeholder at the time of sale and that lenders might be happy to lend in this situation.

Yep - it's possible to do that. It's often called a 'lease extension on completion'.

Obviously, it's dependent on the freeholder cooperating, plus you and the freeholder would need to agree price and terms for the lease extension. (The freeholder doesn't have to agree, and/or they might ask for a stupidly high price and/or poor terms.)

There'll probably be a chunk of extra legal fees to pay for the lease extension.

A lot of conveyancing solicitors won't be experienced in lease extensions. So if you proceed with this, you might want to use a solicitors firm that has a conveyancing solicitor as well as a 'landlord and tenant' specialist.
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chaoticbaker

eddddy said:

chaoticbaker said:

However, I've heard that it is possible to negotiate lease extensions with the freeholder at the time of sale and that lenders might be happy to lend in this situation.

Yep - it's possible to do that. It's often called a 'lease extension on completion'.

Obviously, it's dependent on the freeholder cooperating, plus you and the freeholder would need to agree price and terms for the lease extension. (The freeholder doesn't have to agree, and/or they might ask for a stupidly high price and/or poor terms.)

There'll probably be a chunk of extra legal fees to pay for the lease extension.

A lot of conveyancing solicitors won't be experienced in lease extensions. So if you proceed with this, you might want to use a solicitors firm that has a conveyancing solicitor as well as a 'landlord and tenant' specialist.
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Thank you, that's really helpful. I think it's probably a pie in the sky idea as there's so many variables to consider. I think the vendor is expecting a cash buyer which I definitely am not! 

I was recommended a solicitor's firm but I will check if they have the relevant experience.

GDB2222

Of course, one reason the property looks a good buy is that it is relatively cheap because of the short lease. By the time you have factored in the cost of the lease extension, will it still look so attractive?

seven-day-weekend

Bear in mind the lease extension can be expensive.  My son had a similar length of lease on his flat, it cost  a total of £14k to extend it to 125 years.  It had a lease of about 62 years when he bought it (got a mortgage).

His friend in the same block gota mortgage on one with a lease of about 65 years, the lender only wanted it to have 25 years left after the mortgage term.  So it might be possible to get a mortgage.  Try using a broker, my son did.