PLEASE READ BEFORE POSTING
Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.Leasehold help - 99 year lease, ground rent and lease variance
Options
ssavedge
Posts: 6 Forumite
I am looking to buy a leasehold property and the seller has done a lease variation to extend from 88 years to 99. Also, the seller has paid £18.5k for this variance (which includes changing the ground rent to £375 escalating every 10 years in line with RPI).
1. Is 99 years too short of a lease?
2. Is £18.5k outrageous for a lease variation?
3. Is £375 escalating every 10 years in line with RPI too high and risky?
It’s very difficult to get an understanding of what is normal or acceptable when buying a leasehold property and I feel extremely lost in this process (solicitor has said above amounts are on the high side but didn’t express any concerns, especially with the 99 years). Any advice would be greatly appreciated.
1. Is 99 years too short of a lease?
2. Is £18.5k outrageous for a lease variation?
3. Is £375 escalating every 10 years in line with RPI too high and risky?
It’s very difficult to get an understanding of what is normal or acceptable when buying a leasehold property and I feel extremely lost in this process (solicitor has said above amounts are on the high side but didn’t express any concerns, especially with the 99 years). Any advice would be greatly appreciated.
0
Comments
-
TBH, it depends on the value of the property, but it sounds like the seller might have severely overpaid by paying £18.5k for an extension on those terms (but that's their problem).
The ground rent sounds high - but it depends on the value of the property.
As a guide, with newbuilds, some mortgage lenders won't accept annual ground rents higher than 0.1% of the property value. So £375 ground rent would only be acceptable on a property valued at over £375k.
You could do a statutory lease extension to reduce the ground rent to zero - but I'd guess that might cost you £10k to £15k.0 -
[FONT=Verdana, sans-serif]Has this lease extension already completed?
[/FONT] [FONT=Verdana, sans-serif]If not it would be better to do a statutory lease extension to 178 yrs at £0 ground rent.
[/FONT] [FONT=Verdana, sans-serif]The seller can knock £18.5k off the sale price, serve a statutory extension notice and assign it to you.
[/FONT] [FONT=Verdana, sans-serif]If this extension has already gone ahead then you need to check if the ground rent at £375 with 10 yr reviews is mortgageable.
[/FONT] [FONT=Verdana, sans-serif]You can then do a statutory extension from 99 yrs to 189 yrs either by the seller serving notice now and assigning to you, or you can wait 2 years and do it then[/FONT]0 -
Thank you for your replies.
The lease variations has already been completed. I’m not sure why the seller’s solicitor advised to follow this route. Although what the seller paid for the variation isn’t our problem, I’m worried it sets the prescedent if we wanted to extend later on down the road.
The bank is okay with the terms of the ground rent.
Do you think I should be worried about the 99 year lease? We will probably look to sell around 5 years (depending on the market).0 -
[FONT=Verdana, sans-serif]A 94 yr lease should still be saleable but the £350 ground rent and 10 yr reviews may put off some purchaser particularly if the government has by then passed legislation which would prevent the creation of such a ground rent at that level in the future.[/FONT]
[FONT=Verdana, sans-serif]You can always extend the lease yourself, now or in 2 year time or serve a notice when you sell in 5 years time and assign that notice.[/FONT]
[FONT=Verdana, sans-serif]You need to make sure your current bid reflects the fact that the ground rent/term is quite onerous and will, at some point, need to be extended again.[/FONT]0 -
Although what the seller paid for the variation isn’t our problem, I’m worried it sets the prescedent if we wanted to extend later on down the road.
Paying £18.5k doesn't set a precedent.
If you get a statutory lease extension, the price will be calculated based on a statutory formula (which isn't impacted by what a previous extension cost).
BUT... the statutory formula does take account of ground rent. Because the GR is £375, an extension will cost much more than if the GR was, say, £100.Do you think I should be worried about the 99 year lease? We will probably look to sell around 5 years (depending on the market).
In my experience, most people wouldn't be very worried about buying a 94 year lease - if the GR was reasonable.
For me, the £375 GR might be a bit of an issue, because of the high extension costs - I might expect the flat to be a bit cheaper because of this.0 -
Do you think we will have an issue trying to sell on a flat with a ground rent of £375 that increases every 10 years in line with inflation?0
-
I’m worried it sets the prescedent if we wanted to extend later on down the road.
Once you've owned the property for 2 years you can commence the statutory lease extension process. This adds a further 90 years to the lease and reduces the ground rent to a peppercorn (so effectively nil).
Increasing ground rent may be a problem in the future, but as it's linked to RPI it will depend on what the index does. Is there a minimum increase? Also, if RPI goes into negative, does it allow for the ground rent to go down?0 -
99 years is fine and many new builds come with 99 years, remember only below 80 years you have to renew otherwise you pay a marriage fee, so basically you have 15-20 years before worrying about this again0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards