Renovation mortgage worth it?

Oasis1

dimbo61 said:

Is this a student area ?
HMO ? 
Have you seen a GSC, EICR ?
What is the EPC with single glazed wooden windows ?
This could be a huge money pit and a bad idea for a FTB unless you have deep pockets 

- I think so. I wouldn't plan on renting out to students though. After renovations, if I wanted to rent/sell, I'd be looking for a young couple. It's well connected.

- Nope, it's a 1 bed.

- No, I haven't. But I'll ask to see both - thank you.

- EPC is currently D and close to being a C.

What do you think?

eddddy

Oasis1 said:

I was going to ask that the owner request an extension on the lease, that I can then pay for on completion (as outlined in para 3 here: https://www.bishopslaw.co.uk/lease-extension/uk-leasehold-extensions/). 

Oasis1 said:

 I'll pursue an extension with the vendor/agent. Is it automatically up to 125 years, or can you go for say, 105, to make it cheaper?

What that link is describing is called a 'Statutory Lease Extension'. That adds 90 years to the lease (and reduces ground rent to zero). It might take 6 to 18 months to do it, so it wouldn't be finished by completion - and you wouldn't pay for it on completion (except perhaps a deposit).

I'd suggest that you use a specialist solicitor and valuer for a 'Statutory Lease Extension' - not a conveyancing solicitor.

When the lease extension is complete, you would pay the cost of the lease extension, plus maybe £2k to £5k in fees.


If somebody is suggesting an extension to 125 years or 105 years and/or payment on completion - that would be an 'Informal Lease Extension'.  Sometimes they can be much more expensive (or poor value for money), and you have to be careful about ground rent terms, and any new terms added to the lease. But they are not always bad.

Oasis1

eddddy said:

Oasis1 said:

I was going to ask that the owner request an extension on the lease, that I can then pay for on completion (as outlined in para 3 here: https://www.bishopslaw.co.uk/lease-extension/uk-leasehold-extensions/). 

Oasis1 said:

 I'll pursue an extension with the vendor/agent. Is it automatically up to 125 years, or can you go for say, 105, to make it cheaper?

What that link is describing is called a 'Statutory Lease Extension'. That adds 90 years to the lease (and reduces ground rent to zero). It might take 6 to 18 months to do it, so it wouldn't be finished by completion - and you wouldn't pay for it on completion (except perhaps a deposit).

I'd suggest that you use a specialist solicitor and valuer for a 'Statutory Lease Extension' - not a conveyancing solicitor.

When the lease extension is complete, you would pay the cost of the lease extension, plus maybe £2k to £5k in fees.


If somebody is suggesting an extension to 125 years or 105 years and/or payment on completion - that would be an 'Informal Lease Extension'.  Sometimes they can be much more expensive (or poor value for money), and you have to be careful about ground rent terms, and any new terms added to the lease. But they are not always bad.

Thanks very much for your response.

I think I muddled my words, but I meant that if the current owner starts the process, I can then pick it up when I own the property. I know the lease extension probably wouldn't be done and dusted before completion but by asking the current owner to start the process now, I would a) have an understanding of the cost and b) not have to wait 2 years after completion to apply for it myself. And they benefit from not being responsible for funding it.

However, does this involve the current owner having to pay for a solicitor to serve a statutory extension request? Is there any reason they wouldn't want to do this?

Do you also have any advice on finding a specialist solicitor/valuer, if it does get to that point?

It sounds like the formal, statutory route is best then. I'm too new to all of this (and without lots of cash!) to risk an informal one.

eddddy

Oasis1 said:

Thanks very much for your response.

I think I muddled my words, but I meant that if the current owner starts the process, I can then pick it up when I own the property. I know the lease extension probably wouldn't be done and dusted before completion but by asking the current owner to start the process now, I would a) have an understanding of the cost and b) not have to wait 2 years after completion to apply for it myself. And they benefit from not being responsible for funding it.

However, does this involve the current owner having to pay for a solicitor to serve a statutory extension request? Is there any reason they wouldn't want to do this?

Do you also have any advice on finding a specialist solicitor/valuer, if it does get to that point?

It sounds like the formal, statutory route is best then. I'm too new to all of this (and without lots of cash!) to risk an informal one.

It's up to you and the seller to decide (negotiate) between you who pays for what.

The costs will typically include:

• The leaseholder's valuer's fees
• The leaseholder's solicitor's fees
• The freeholder's valuer's fees
• The freeholder's solicitor's fees
• The cost of the lease extension

Typically, the sequence of steps is like this:

• You and/or the seller instruct a specialist valuer to 'estimate' the cost of the lease extension

• You and the seller exchange contracts

• You and/or the seller instruct a specialist solicitor to serve notice on the freeholder with your offer price (the valuer's estimate)

• You complete the purchase of the flat

• The freeholder replies to you with their counter offer price

• You (or your valuer) negotiates the price with the freeholder

• If you can eventually agree a price, you complete the lease extension. If you can't agree, you go to tribunal (i.e. go to court)

In terms of finding a specialist solicitor - you posted a link to one. They seem to offer an initial free phone consultation, so you can have a chat with them as a starting point. And maybe chat with a few others as well.

Oasis1

@eddddy Thanks so much for the detail here. Owner has asked freeholder for an estimate so will be interesting to see what they come back with but will take with a huge pinch of salt given they're probably coming up with their own valuation!

eddddy

Oasis1 said:

@eddddy Thanks so much for the detail here. Owner has asked freeholder for an estimate so will be interesting to see what they come back with but will take with a huge pinch of salt given they're probably coming up with their own valuation!

So that sounds like they're considering an 'Informal Lease Extension' - that can be sorted out very quickly, if everyone agrees and everyone is motivated.

But there are no 'rules' about price, years added to lease, ground rent, terms added to the lease, etc.

The freeholder can ask for any price they like, and any terms they like. As a result, some freeholders ask for a ridiculously high price and/or terms that are bad for the leaseholder.


(In the past, some leaseholders reduced the value of their flats and/or made them unmortgageable, by agreeing to onerous terms in their lease extensions. Your conveyancing solicitor should be able to advise you about any onerous terms, but your solicitor probably won't be able to advise you if you're getting good value for money.) 

Oasis1

eddddy said:

Oasis1 said:

@eddddy Thanks so much for the detail here. Owner has asked freeholder for an estimate so will be interesting to see what they come back with but will take with a huge pinch of salt given they're probably coming up with their own valuation!

So that sounds like they're considering an 'Informal Lease Extension' - that can be sorted out very quickly, if everyone agrees and everyone is motivated.

But there are no 'rules' about price, years added to lease, ground rent, terms added to the lease, etc.

The freeholder can ask for any price they like, and any terms they like. As a result, some freeholders ask for a ridiculously high price and/or terms that are bad for the leaseholder.


(In the past, some leaseholders reduced the value of their flats and/or made them unmortgageable, by agreeing to onerous terms in their lease extensions. Your conveyancing solicitor should be able to advise you about any onerous terms, but your solicitor probably won't be able to advise you if you're getting good value for money.) 

I know it doesn't help whinging about it, but my goodness the government needs to sort out the property market and leaseholds! It's like we're still in the medieval ages when it comes to land/tenancy rights.

An informal lease extension scares me a little, but I'd aim to get good advice from a solicitor. The main thing is understanding a ballpark figure, as I'll immedietely be able to tell if I can afford it or not. Likely the latter, given the rest of the work needed doing!