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sofa_searcher
Posts: 94 Forumite
Hello all,
I'm searching the property market for my first property. I've come across instances where flats are on sale on steep discounts due to their short lease e.g 49 years left. Considering the discount and the premium required to extend the lease (50% marriage value) I reckon some of these flats will be within my budget. Now, in order to purchase the flat with a mortgage i'm aware i will need an agreement for the lease extension. A willing seller will get the process rolling and set up the lease to be transferred to myself upon contract extension.
My question surrounds unwilling sellers who for whatever reason do not want to extend the lease. How exactly do i get an agreement with the freeholder if i know the management company?
What are the pros and cons and Is there any cost on my part? For example a flat that i like is on sale for £130k with 49 years left. How much approximately will a lease extension cost?
Are the chance low that the term of the new lease will be poor?
Is it even worth it as a FTB?
Any experience with the above situation will be appreciated.
I'm searching the property market for my first property. I've come across instances where flats are on sale on steep discounts due to their short lease e.g 49 years left. Considering the discount and the premium required to extend the lease (50% marriage value) I reckon some of these flats will be within my budget. Now, in order to purchase the flat with a mortgage i'm aware i will need an agreement for the lease extension. A willing seller will get the process rolling and set up the lease to be transferred to myself upon contract extension.
My question surrounds unwilling sellers who for whatever reason do not want to extend the lease. How exactly do i get an agreement with the freeholder if i know the management company?
What are the pros and cons and Is there any cost on my part? For example a flat that i like is on sale for £130k with 49 years left. How much approximately will a lease extension cost?
Are the chance low that the term of the new lease will be poor?
Is it even worth it as a FTB?
Any experience with the above situation will be appreciated.
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Comments
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sofa_searcher wrote: »My question surrounds unwilling sellers who for whatever reason do not want to extend the lease. How exactly do i get an agreement with the freeholder if i know the management company?
You can certainly approach the freeholder and explain that you are planning to buy the flat...
...and see if they will enter into negotiations for a lease extension on completion with you.
They may or may not be interested.sofa_searcher wrote: »What are the pros and cons and Is there any cost on my part?
The freeholder will probably expect you to pay their legal costs (plus you'll have to pay your own legal costs).
So, for example, there's the risk that you pay the freeholder's legal costs, then the leaseholder changes their mind about selling the flat to you.sofa_searcher wrote: »For example a flat that i like is on sale for £130k with 49 years left. How much approximately will a lease extension cost?
Try: http://www.myleasehold.co.uk/lease-extension-calculatorsofa_searcher wrote: »Are the chance low that the term of the new lease will be poor?
The terms will be whatever you agree with the freeholder.
If you can't negotiate terms that are acceptable to you, I guess you'd walk away.0 -
[FONT=Verdana, sans-serif]You can ask the seller to serve a S42 notice after you exchange contracts then assign that notice to you. This need not cost the seller anything and you then go on to negotiate and complete the lease extension.[/FONT]
[FONT=Verdana, sans-serif]Not sure if that will satisfy your mortgage co though.[/FONT]0 -
[FONT=Verdana, sans-serif]You can ask the seller to serve a S42 notice after you exchange contracts then assign that notice to you. This need not cost the seller anything and you then go on to negotiate and complete the lease extension.[/FONT]
[FONT=Verdana, sans-serif]Not sure if that will satisfy your mortgage co though.[/FONT]
This will ideal, i'll have to speak to the estate agent to see if the seller is willing to submit the S42 notice0 -
The other question is how will funding work?
Will the lender lend funds to cover the cost of the flat and lease extension or will it just be for the agreed price of the flat?
If it's the latter how does someone pay for the lease extension if say the seller was able to transfer the s42 notice? Will you just get a Standard Variable Rate mortgage and then remortgage once the lease extension is complete?0 -
sofa_searcher wrote: »This will ideal, i'll have to speak to the estate agent to see if the seller is willing to submit the S42 notice
[FONT=Verdana, sans-serif]If the seller seems reluctant to do that, ask that they speak to their solicitor because it really is Zero risk and cost for them. They only serve the S42 after you have exchanged contracts and they can serve a notice drawn up by your solicitor at your cost.[/FONT]
[FONT=Verdana, sans-serif]The big question is whether you would get a mortgage on the unextended lease, speak to a broker.[/FONT]0 -
If you go down the s42 route, it sounds like you would need a mortgage lender who will lend on a 49 year lease, plus guarantee to lend a further amount for a lease extension, maybe 2 to 4 months later.
It might be very difficult to find a mortgage lender who will be that flexible.
At the very least, I suspect that you might need a large deposit, combined with a reduced payback period, for the 49 year lease.
But you might get better terms once the lease is extended.0 -
[FONT=Verdana, sans-serif]If the seller seems reluctant to do that, ask that they speak to their solicitor because it really is Zero risk and cost for them. They only serve the S42 after you have exchanged contracts and they can serve a notice drawn up by your solicitor at your cost.[/FONT]
[FONT=Verdana, sans-serif]The big question is whether you would get a mortgage on the unextended lease, speak to a broker.[/FONT]
If the S.42 is not served until after exchange how does one guarantee it will be served and assigned?0 -
strawberries1 wrote: »If the S.42 is not served until after exchange how does one guarantee it will be served and assigned?
[FONT=Verdana, sans-serif]Both are made a specific term of the contract.[/FONT]
[FONT=Verdana, sans-serif]For example something like this “The seller will serve a s42 notice on the competent landlord in accordance with the attached draft. The seller will assign the s42 notice to the buyer in accordance with the attached assignment document........” [/FONT]0 -
[FONT=Verdana, sans-serif]Both are made a specific term of the contract.[/FONT]
[FONT=Verdana, sans-serif]For example something like this “The seller will serve a s42 notice on the competent landlord in accordance with the attached draft. The seller will assign the s42 notice to the buyer in accordance with the attached assignment document........” [/FONT]
Thank you! Done.0
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