Is 87 yrs lease too short?

ahfat41

Saw a flat am interested and the lease is 87 yrs. Also ground rent is £300 doubling up every 33 yrs. With the lease reform the ground rent might be reduced to pepper corn. Will have to consider extending lease after two years. 99 yrs was granted at the beginning usually when you extend the remaining lease should have been added to the 99 yrs. Appreciate some advice. Thanks

eddddy

ahfat41 said:

With the lease reform the ground rent might be reduced to pepper corn. 

There's no suggestion that ground rent will automatically be reduced for existing leases. In fact, all the discussion so far very clearly assumes that won't happen.

But there's talk of giving leaseholders the statutory right to pay a lump sum to reduce their ground rent to zero.

ahfat41 said:

Will have to consider extending lease after two years. 99 yrs was granted at the beginning usually when you extend the remaining lease should have been added to the 99 yrs. 

Under current legislation, a statutory lease extension adds 90 years to the lease. In 2 years time you'll have 85 years on the lease. So a statutory extension would take it up to 175 years - and reduce ground rent to zero.

The lease reforms talk about changing a statutory lease extension to extend the lease to 990 years at zero ground rent.

ahfat41

Info about lease from seller- The remaining lease is 87 years (term and commencement date per the leasehold agreement: 99 years from the 21st August 2009).If it was a statutory extension why 99 yrs not remaining years +99. Is it worth considering buying. In two years time what will be the cost if extending. Flat in London above commercial,premises at £400,000. Thanks

MaryNB

ahfat41 said:

Info about lease from seller- The remaining lease is 87 years (term and commencement date per the leasehold agreement: 99 years from the 21st August 2009).If it was a statutory extension why 99 yrs not remaining years +99. Is it worth considering buying. In two years time what will be the cost if extending. Flat in London above commercial,premises at £400,000. Thanks

Sounds like it was an non-statutory extension. For an informal extension terms can be anything the freeholder and leaseholder agree to.

Also, as noted above, a statutory extension is 90 years, not 99.

If you're buying a flat above a commercial premises make sure you have an appropriate lender. Some lenders aren't keen on flats above a business, especially of it's anything like a takeaway. 

There are a few online calculators that you can use to estimate the cost of a statutory lease extension but it will only be an estimate with an upper and lower range. https://www.lease-advice.org/calculator/

eddddy

ahfat41 said:

Info about lease from seller- The remaining lease is 87 years (term and commencement date per the leasehold agreement: 99 years from the 21st August 2009).If it was a statutory extension why 99 yrs not remaining years +99. Is it worth considering buying. In two years time what will be the cost if extending. Flat in London above commercial,premises at £400,000. Thanks

The law says a statutory lease extension adds 90 years to the remaining term of the lease.

• So if you extend in 2 years time you'll have 85 years left. Add a 90 year extension and it will become 175 years.

• If you wanted to extend the lease today, the cost might be £10k to £12k - and the fees might be £2k to 3k on top.

• If the law remains unchanged, it might cost £1k more in 2 years time.

The law changes are intended to reduce the £2k/£3k fees. There's no real indication that the £10k to £12k price will be reduced.

A major law change being talked is about making statutory lease extensions go to 990 years. But maybe that will make them more expensive. Who knows?

Here's some info on the current law: https://www.lease-advice.org/advice-guide/lease-extension-getting-started/