Buying flat with short lease - good idea?

Annabee

That's a scary thought about possible future repair bills.   The flats are from around about 60s/70s from the style of building.   I'm not sure friend realises as she's never lived in a flat (neither have I).  Maybe that's what put other buyers off?  How would you go about finding out if future repair bills are likely?  From surveyor or solicitor?

General_Grant

macman said:

Getting a mortgage is not relevant, as no-one will lend on a lease that short. After a 25 year mortgage, it'll have just 33 years left, and the minimum is normally 35 years left on the lease. If in 15-20 years time it needs to be sold on, for whatever reason, only a cash buyer would be interested, at a knockdown price. 

Mortgage terms do not have to be 25 years.  Our one and only mortgage was for 21 (paid off in less than 8).

sammyjammy

Annabee said:

That's a scary thought about possible future repair bills.   The flats are from around about 60s/70s from the style of building.   I'm not sure friend realises as she's never lived in a flat (neither have I).  Maybe that's what put other buyers off?  How would you go about finding out if future repair bills are likely?  From surveyor or solicitor?

What kind of flat is it?  How many floors?  How many flats?  Its likely to have been on the market for a while due to the short lease as its not mortgage-able.  If there are extensive repairs planned then this would/should come out with the conveyancing process.  Its very unlikely they'd get a personal loan to cover the whole amount needed.

eddddy

Annabee said:

That's a scary thought about possible future repair bills.   The flats are from around about 60s/70s from the style of building.   I'm not sure friend realises as she's never lived in a flat (neither have I).  Maybe that's what put other buyers off?  How would you go about finding out if future repair bills are likely?  From surveyor or solicitor?

You could say it's similar to owning a house.

For example:

• If you buy a house with a 'worn-out' roof, you'd have to be prepared to pay for a new roof soon.

• If you buy a flat in a block of 4 flats with a 'worn-out' roof, you'd have to be prepared to pay 25% of the cost of a new roof soon.

It just seems to come as a surprise to people who rented previously. Especially, if they buy a flat right down on the ground floor - they don't realise that they have to contribute to the cost of repairing/replacing the roof a few floors above them. (It would all be explained in their lease.)

You could ask a surveyor to check the condition of the building, and assess what repairs might need doing soon.

The solicitor would ask the freeholder about repairs already planned for the future, and how much repairs have cost in the past etc. (Some freeholders would have detailed plans for future repairs and maintenance - but others won't. They'll just repair stuff as and when leaseholders complain.)


Edit to add...

What I've described above is how most flat leases work. But there are also some unusual leases and arrangements - so this flat lease might be different.

Annabee

sammyjammy said

What kind of flat is it?  How many floors?  How many flats?  Its likely to have been on the market for a while due to the short lease as its not mortgage-able.  If there are extensive repairs planned then this would/should come out with the conveyancing process.  Its very unlikely they'd get a personal loan to cover the whole amount needed.

It's a two bed flat, with a garage in a block.  There are about 70-75 flats in the block, which is six floors high.  It's in what is considered a posh area of the city, so the price is quite surprising.  The block looks to have been built approximately 1970, give or take a few years.

Why is that about the personal loan?   With no rent to pay they'd be able to pay back £30,000 very quickly, at over £1,000 per month.    I don't know how keen they are on asking family.  

eddddy

Annabee said:

It's a two bed flat, with a garage in a block.  There are about 70-75 flats in the block, which is six floors high.  It's in what is considered a posh area of the city, so the price is quite surprising.  The block looks to have been built approximately 1970, give or take a few years.

A 50 year old block might (or might not) be getting worn out and have some big bills ahead.

With 6 floors, I guess it has lifts. If they need refurbishment soon, that could be very expensive. Even routine maintenance and safety checks on lifts can be expensive.

With 70 flats, they might have to pay 1/70th of the cost - but sometimes big flats have to pay more and small flats have to pay less.


BUT... is the freehold owned by the council or a housing association? They're notorious for giving leaseholders eye-wateringly high service charge bills.

NameUnavailable

Annabee said:

sammyjammy said

What kind of flat is it?  How many floors?  How many flats?  Its likely to have been on the market for a while due to the short lease as its not mortgage-able.  If there are extensive repairs planned then this would/should come out with the conveyancing process.  Its very unlikely they'd get a personal loan to cover the whole amount needed.

It's a two bed flat, with a garage in a block.  There are about 70-75 flats in the block, which is six floors high.  It's in what is considered a posh area of the city, so the price is quite surprising.  The block looks to have been built approximately 1970, give or take a few years.

Why is that about the personal loan?   With no rent to pay they'd be able to pay back £30,000 very quickly, at over £1,000 per month.    I don't know how keen they are on asking family.  

They need to ask about the service charges and ground rent. Obviously current service charges are only a guide as they can vary wildly year to year depending on the work required, but it will give an idea (if the standard charge is high then it suggests that other work required will also be costly).

The issues with flats at the moment include EWS1 (any cladding, wooden balconies?), upcoming fire safety regulations, ground rent increase clauses in the lease, and now EPC requirements changing (minimum C for all properties being the Govts. aim which will be impossible with some flats).

If the only thing 'wrong' with this flat is the short lease, given your friends position, it might well be a very sensible purchase. They can always extend the lease if they get the windfall you mention, and there are also Govt. plans to change the rules for extending leases (to make it quicker and cheaper) but it's yet to be determined.

theoretica

How many years of their current rent will buying the flat cost?  Buying the lease is, in effect, paying all the rent up front.  The big disadvantage I see is if they want or need to move in 15 years time and haven't been able to extend the lease - selling a flat with even shorter lease might be hard.

Have they spoken to a mortgage broker - with some years to go before retirement age they might be able to borrow more than they think (just with a less than 25 year term) and look at a broader range of properties.