Thinking of Buying a flat - leasehold expires in 54yrs - advice!!

ler01kjh

Hi,
I am considering buying a flat which is priced at £200k. However, it has its original lease of 99 years from 1963/4. This leaves just 54yrs on the lease.

A number of things concern me:
1. I don't think the current price takes account of the shortness of the lease, and if I were to make an offer, I'm not sure how much to take off the price.
2. The agent reckons it would cost about £12k...but don't know where that has come from.
3. Could I get a mortgage on the property, perhaps if the vendor initiated the right to extend the lease?

Is there any way of finding out prices paid for leases, to give a better idea? Also how much would it cost to get the valuation and solicitors fees?

Incidentally, the property needs about £10k spent on it to modernise and bring it up to standard.

Any advice gratefully received.
Thanks.

Doozergirl

I'd budget more like £20,000 for the lease extension. In fact, I'd simply ask the vendor to extend the lease and offer according to the work that needs doing instead. Then you offer just taking into account the work that needs doing. It will take a while longer than your average purchase though.

If you bought without the lease extension, it might just be possible to get a mortgage but you will be limited to the number of lenders and, to be honest, it's the sort of thing I'd take a risk on but not many average people will.

Where is the flat? What do you think comparables fetch? Do you know what the ground rent is each year?

ler01kjh

Thanks. It's in Maidenhead, ground rent is £25pa; last similar property sold for £183k in Oct 2006, but I would assume it was in reasonable/good condition. Assuming it was, £200k would be about right for inflation during that period. So I would base an offer on £200 minus £10k work minus 10% hassle factor. On top of this is the lease issue. Of course I don't know what sort of lease the last property to be sold had. No other properties are up for sale in the immediate area, but you can get a similar flat in a good/refurbished condition for around £190-£205k.
The flat is being sold by the daughter of the owner who has gone into a nursing home, so is looking to move quickly as needs the funds...
I'd be willing to take the risk but would have to offset the risk with the price of course....

Doozergirl

As long as you have your head screwed on

In my head, the flat isn't worth paying more than £165,000 for. So you're seeing clearly IMO.

Find yourself a whole of market mortgage broker and ask the daughter to obtain a quote from the freeholder for extending the lease. That will give her a reality check

neverdespairgirl

ler01kjh wrote: »

Thanks. It's in Maidenhead, ground rent is £25pa; last similar property sold for £183k in Oct 2006, but I would assume it was in reasonable/good condition. Assuming it was, £200k would be about right for inflation during that period.

Sounds unlikely to me that house price inflation has been 8.5% since just over a year ago; even without the leasehold issues it sounds expensive.

ler01kjh

neverdespairgirl wrote: »

Sounds unlikely to me that house price inflation has been 8.5% since just over a year ago; even without the leasehold issues it sounds expensive.

Yes, you might be right - I used http://www.nationwide.co.uk/hpi/ which gave the difference in Q4 2006 and Q4 2007 for outer metropolitan. Suppose there would be wide variation even within this group... but lack of sales in the area make it difficult to judge.

jonesMUFCforever

I would be very surprised if you get a mortgage on a property with such a short lease.

Doozergirl

There are companies who will lend on 25 years + term of the mortgage. Whole of market broker is needed though!

neverdespairgirl

ler01kjh wrote: »

Yes, you might be right - I used http://www.nationwide.co.uk/hpi/ which gave the difference in Q4 2006 and Q4 2007 for outer metropolitan. Suppose there would be wide variation even within this group... but lack of sales in the area make it difficult to judge.

I would have thought Maidenhead might be South East rather than outer Met, though?

I also think prices have slid slightly since Q4 2007.

Sooler

Doozergirl wrote: »

There are companies who will lend on 25 years + term of the mortgage. Whole of market broker is needed though!

Also consider how you are ever going to sell this property if you ever intend to, or even if you will be able to sell it. With the lease as it is causing concerns and problems, unless the lease is extended, it will be even shorter when you come to sell it. Consider what the lease may be when you come to sell and what consequences that may have.

Richard_Webster

Why get yourself the hassle? With only 54 years left the daughter more or less has to get a lease extension. She could arrange it so that you pay her a market price for a long lease and she uses your money to complete the lease extension back to back - if the Freeholder will agree.

The identity of the freeholder could be important. There are some out there who will use prevarication and exploit the statutory lease extension process for all its worth to get as much as possible from you for the extension - this runs up costs for you so you then become desperate to settle. Also, although unlikely, there are some freeholders who are such bad news that if they own the freehold I would advise a buyer not to buy at all!