Leasehold flats with low leases auction

Ybe

If a 1 bed flat is in very poor condition and has about 10 years left on the lease, can it even be sold on auction? The only thing going for it is that it’s in London and is about a 2 minute walk from the tube station. 

RHemmings

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

EDIT: I assumed that you are a potential buyer. But, after reading @youth_leader's post and re-reading yours, it's not clear if you are seller or buyer. 

youth_leader

Do you have to go to auction?  Cash buyer instead?   I sold at auction to a developer,  and he had a mortgage with Nat West.  Made me wait the weekend whilst he 'passed it in front of his underwriters'.

Ybe

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

RHemmings

Ybe said:

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

In theory, abolish marriage value. And some other changes. In your case, abolishing marriage value may be the biggest change. 

Note that until the law actually comes into force (or if it does), then things can still change. 

https://thomaslegal.co.uk/what-you-need-to-know-about-changes-to-leasehold-legislation/

BarelySentientAI

Ybe said:

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

Make some parts of the equation cheaper (or zero) and possibly make other bits of it more expensive.

user1977

Ybe said:

If a 1 bed flat is in very poor condition and has about 10 years left on the lease, can it even be sold on auction? The only thing going for it is that it’s in London and is about a 2 minute walk from the tube station. 

What do you mean by "can it"? Do you mean it might be prohibited in some way? Or just that nobody would want to buy it?

I don't see why either would apply - all sorts of weird and wonderful properties end up in auction. It will have a value, obviously a much lower one than a property with a longer lease and/or better condition.

Ybe

RHemmings said:

Ybe said:

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

In theory, abolish marriage value. And some other changes. In your case, abolishing marriage value may be the biggest change. 

Note that until the law actually comes into force (or if it does), then things can still change. 

https://thomaslegal.co.uk/what-you-need-to-know-about-changes-to-leasehold-legislation/

Some people are saying that it might increase the cost of lease extensions?  How if so? 

BarelySentientAI

Ybe said:

RHemmings said:

Ybe said:

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

In theory, abolish marriage value. And some other changes. In your case, abolishing marriage value may be the biggest change. 

Note that until the law actually comes into force (or if it does), then things can still change. 

https://thomaslegal.co.uk/what-you-need-to-know-about-changes-to-leasehold-legislation/

Some people are saying that it might increase the cost of lease extensions?  How if so? 

Changing the deferment rate.

At the end of a lease, the freeholder gets the property back.  When you extend a lease, that puts off (defers) the freeholder's ability to do that - and something is required to compensate for this.

So for a 200k property with 80 year lease, it's asking "how much, if I put it in the bank today at interest rate X, would be worth 100k in 80 years".  A 2007 tribunal decision ('Sportelli') has sort of meant that X is 5% for flats at least - which makes the 'now cost' about £4000.

£4000 left in the bank at 5% for 80 years is about 100k.

If they changed this to 6%, it would make things cheaper.  You would only need to put £2000 in the bank today at that rate.

If it changed to 4%, things would get more expensive.  You would need to put something like £8500 in the bank today at that rate.

There's also something similar about "what's the value of future ground rents", which uses the discount rate.

Neither are set in the legislation, just noted that they will be set later in future legislation, so there are still arguments about which direction (if any) these rates will change. 

RHemmings

Ybe said:

RHemmings said:

Ybe said:

RHemmings said:

Sounds like a gamble that the new law will come into effect still making it cheaper to extend a short lease. I would guess that if the price is low enough, that some people will take that gamble. 

Online leaseold extension calculators don't work on leases that short, that I've seen. The marriage value (based on laws currently in effect) would be considerable.

It's certainly an interesting property. Can I ask if you can update us after it sells at auction? 

I found a question online from 6 months ago where someone was asking about just this. In that case, the freeholder was a company that doesn't exist any more. This was said to be a risk because it may extend the process of getting an extension, and time is tight. 

Does anyone know what the new law will do? 

In theory, abolish marriage value. And some other changes. In your case, abolishing marriage value may be the biggest change. 

Note that until the law actually comes into force (or if it does), then things can still change. 

https://thomaslegal.co.uk/what-you-need-to-know-about-changes-to-leasehold-legislation/

Some people are saying that it might increase the cost of lease extensions?  How if so? 

Answered by @BarelySent@BarelySentientAI

There's a flat around me that has a very high ground rent (I think about £800 a year), an RPI clause, and a lease of about 250 years or so. I estimated that the cost to extend the lease was about £180k or something ridiculous. The flat is basically unsaleable, and multiple attempts to sell it for next to nothing have failed. And, it's possible that the leasehold reform might make it even more expensive to extend the lease (to zero ground rent) again.