Buying a massonette with 81 year lease

Darcy82

Im a first time buyer and I have made an offer on a masonette. I was not aware of the difficulties  a lease  of 81 years could cause and I am thinking of pulling out.

I was told that the price reflects the short lease but i am not able to find similar properties in the area that have sold to verify this. 

I am waiting on the legal info from the seller re the lease terms and other legal info.

My questions are: 
Is it appropriate to approach estate agents in the local are re what they would market the property at with a long lease. 

Can the statutory rout be initiated by the seller to ensure that it can be extended prior to dropping below 80 years but not completed in favour for an informal deal that retains a fair ground rent and conditions. 

My ideal situation is to get a cheaper informal lease extension that can be negotiated to be part of completion. Reading the forums and not knowing a lot though this seems to be a pipe dream. Any advice would be appreciated. Thank you

katejo

I recommend that you contact the Lease Advisory Service  Home - The Leasehold Advisory Service (lease-advice.org) When I bought my first maisonette, it had a new lease of 99 years and I sold it at 86 years. the person who bought from me let it drop below 80 years and she has had to extend the lease before selling, Have you asked the agent why the current leaseholder is not extending the lease before sale? It could be that they have a very difficult, non cooperative freeholder as I had. Have you also asked questions about the content of the lease (eg. how often the ground rent is increased, who has responsibility for maintenance and also the building insurance?

The link I gave above answers a few questions  but advises you to seek advice form a solicitor about potential lease extension and who is responsible/allowed to extend it.   Is it possible to purchase a flat and do a lease extension at the same time? - The Leasehold Advisory Service (lease-advice.org)

eddddy

Darcy82 said:

I was told that the price reflects the short lease but i am not able to find similar properties in the area that have sold to verify this. 

You should find out the total cost of extending the lease, and adjust the maisonette's price accordingly.

For example...

• The estimated cost of the lease extension might be £10k
• The legal/valuation fees might be around £4k

• ... so you would aim to pay at least £14k less than a similar flat with a long lease

Darcy82 said:

Can the statutory rout be initiated by the seller to ensure that it can be extended prior to dropping below 80 years but not completed in favour for an informal deal that retains a fair ground rent and conditions. 

The 'statutory lease extension' process would work like this:

• The seller starts the process by serving notice on the freeholder.

• You (or your valuer) then negotiates a price and terms with the freeholder (or the freeholder's valuer). Up until June 2022, you could have agreed to retain a ground rent. But the Leasehold Reform (Ground Rent) act 2022 now requires ground rents to be zero.

• If you and the freeholder cannot agree a price - you can ultimately ask a tribunal to decide on a price. But that route is very expensive, and people normally try to avoid doing that.

Darcy82 said:

My ideal situation is to get a cheaper informal lease extension that can be negotiated to be part of completion. 

As a result of the leasehold reform (ground rent) act 2022, you can no longer get a cheaper informal lease extension by retaining a ground rent.

Darcy82

katejo said:

I recommend that you contact the Lease Advisory Service When I bought my first maisonette, it had a new lease of 99 years and I sold it at 86 years. the person who bought from me let it drop below 80 years and she has had to extend the lease before selling, Have you asked the agent why the current leaseholder is not extending the lease before sale? It could be that they have a very difficult, non cooperative freeholder as I had. Have you also asked questions about the content of the lease (eg. how often the ground rent is increased, who has responsibility for maintenance and also the building insurance?

The link I gave above answers a few questions  but advises you to seek advice form a solicitor about potential lease extension and who is responsible/allowed to extend it.

Thank you for the advice. Im waiting on answers about the lease terms but they are slow to come in. Re the lease being extended i was told that the property was inherited and had been left empty for some time. I've been told that they have never attempted to increase the lease but they have not given me any more info. Sounds like i need to go and do some more digging

Darcy82

eddddy said:

Darcy82 said:

I was told that the price reflects the short lease but i am not able to find similar properties in the area that have sold to verify this. 

You should find out the total cost of extending the lease, and adjust the maisonette's price accordingly.

For example...

• The estimated cost of the lease extension might be £10k
• The legal/valuation fees might be around £4k

• ... so you would aim to pay at least £14k less than a similar flat with a long lease

Darcy82 said:

Can the statutory rout be initiated by the seller to ensure that it can be extended prior to dropping below 80 years but not completed in favour for an informal deal that retains a fair ground rent and conditions. 

The 'statutory lease extension' process would work like this:

• The seller starts the process by serving notice on the freeholder.

• You (or your valuer) then negotiates a price and terms with the freeholder (or the freeholder's valuer). Up until June 2022, you could have agreed to retain a ground rent. But the Leasehold Reform (Ground Rent) act 2022 now requires ground rents to be zero.

• If you and the freeholder cannot agree a price - you can ultimately ask a tribunal to decide on a price. But that route is very expensive, and people normally try to avoid doing that.

Darcy82 said:

My ideal situation is to get a cheaper informal lease extension that can be negotiated to be part of completion. 

As a result of the leasehold reform (ground rent) act 2022, you can no longer get a cheaper informal lease extension by retaining a ground rent.

Thank you! Ive finally found a comparable propery that sold for 10k more than the current pice in 2018 so i think there is enough value to make it equitable even with the formal route. I think i read that once the statatory route has been initiated the value must be from the amount of lease left at that moment. Do you know if that applies to the marriage costs. I.e. because it was initiated before going below 80 years it would not incur the marriage vale costs if for some reason it took a long time to resolve 

eddddy

Darcy82 said:

Ive finally found a comparable propery that sold for 10k more than the current pice in 2018 so i think there is enough value to make it equitable even with the formal route.

It's probably more important to find out what the lease extension (with fees) will cost - as you'll need the cash to pay at short notice, and it's unlikely you can add it to your mortgage.

And if you can't raise the cash at short notice, you'll lose the lease extension - but still have to pay around £4k in fees.

Darcy82 said:

I think i read that once the statatory route has been initiated the value must be from the amount of lease left at that moment. Do you know if that applies to the marriage costs. I.e. because it was initiated before going below 80 years it would not incur the marriage vale costs if for some reason it took a long time to resolve 

The valuation is fixed at the date the process is started. (That is the date that the leaseholder serves a section 42 notice on the freeholder.)

So there is no risk of marriage value being added, even if the lease drops below 80 years, after notice has been served.


But some nasty freeholders might try to trick you into withdrawing your statutory application....

• For example, by 'promising' you a good informal deal - so you withdraw your statutory application. Then they break their 'promise'.

• Then you have to wait a year - and start your application again, and serve notice again. But then there is less than 80 years remaining on the lease.

That's one reason why it's good to have a specialist solicitor to help you. They should be aware of all the tricks, and protect you from them.