FTB cash-only flat with short lease and major works pending

juicyluce9

Hi all,

I’m a first-time buyer and would really appreciate some guidance before I submit an offer on a flat I’ve viewed.

The property is listed at £130k and is a probate, cash-buyer purchase due to the lease only having 54 years remaining. A neighbour on the building committee reportedly bought their share a few years ago for around £750, but I don’t yet know whether that figure would apply now or what the exact process/cost would be for me.

The block has 15 flats and there are major roof works expected within the next 24 months. I’ve been told current quotes are in the £100k–£200k range overall. Based on that, my share could potentially be in the region of £10k–£15k. Ground rent is currently £2,250 per year and is expected to rise to around £3,000–£3,250 to help cover the works.

The flat itself also needs fairly major internal updates; a new central heating system, electrical upgrades (at least a consumer unit, possibly more) and general cosmetic refurbishments. My rough estimate is £15k–£20k to bring it up to a reasonable standard.

The flat is in a desirable area and there is a new train station opening nearby, which would increase it's longer-term resale prospects but I would likely live in the property for at least a few years.

My initial thought was to offer around £100,000, assuming the renovation costs would be around £20k. However, after reading more about short leases and taking into the account the uncertain roof costs, I’m starting to wonder whether the offer is too high?

Any advice/input would be greatly appreciated!

RelievedSheff

I doubt anyone would accept an offer £30k under asking price on a £130k property.

The property will have been priced with the short lease, updates and building works in mind already.

MyRealNameToo

Think you are mixing up service charge and ground rent, ground rent is simply a payment to the freeholder for the use of the land the building is on. Service charges pay the cost of running the building including maintenance and repairs etc.

£100k could be far too much and £130k asking could be an incredible bargain. You need to look at what the value of other properties are in the area worth without either the maintenance or lease issues.

If the service charge has already been increased to build up a sinking fund to contribute to the roof you may be asked to pay the vendor for their recent contributions to the sinking fund on top of your offer on the property.

user1977

My initial thought was to offer around £100,000

How did you arrive at that figure?

juicyluce9

https://forums.moneysavingexpert.com/discussion/comment/81879985#Comment_81879985

Yes, you're right; I do mean service charge. The latest sale for a flat in the building was in Feb 2024 for £160,000. The interiors looked mostly modernised from the pictures available.

juicyluce9

https://forums.moneysavingexpert.com/discussion/comment/81879992#Comment_81879992

It was with the assumption that the renovation costs would be around £20k. Again, I'm a FTB so am very inexperienced

juicyluce9

https://forums.moneysavingexpert.com/discussion/comment/81879992#Comment_81879992

plus the short lease

RelievedSheff

https://forums.moneysavingexpert.com/discussion/comment/81880004#Comment_81880004

So if a renovated flat sold for £160k (assuming the flats are a similar size and layout) then with a £20k renovation cost the you should arrive at about £140k.

Which makes the £130k asking price sound in the right ball park already.

juicyluce9

https://forums.moneysavingexpert.com/discussion/comment/81880018#Comment_81880018

Thank you. I really appreciate the explanation :)

poseidon1

Curious there has been virtually no mention that at 54 years this lease is unmortgageable, with no indication what an extension to say 125 years would cost.

In that vein I fail to see any reasonable comparison can be drawn with the flat that sold for £160k in 2024, unless that flat equally suffered from an unmortgageable short lease.

On that basis no one can say whether £130k or even £100k offer price is reasonable especially since no mention has been made of ground rent cost or whether that is on a periodic escalation basis.

OP I would suggest that there are too many unknowns with this particular proposition, and as a FTB you would be best advised to seek a property with far fewer issues and potential liabilities that could quickly become a burden to you. Ultimately you would want this property to become mortgageable and key to this is the lease extension. Why has the present vendor not instigated this or at least obtained an indication of costs?

Generally, as regards purchasing short leases, this is not an area I would encourage any FTB with little or no land law experience to venture into, even with competent advice.

monkey-fingers

If you ground rent, for instance, was £200 a year, with only 54 years left, a quick calculation says that the lease extension would be £28k + costs (both sides solicitors).

You're in marriage value territory under 80 years.