Leasehold

Steven74_2 · 19 February 2018 at 7:46PM

Hi All first ever post so here goes

I bought a second floor flat in 2011 for £85,000 (no mortgage) and pay around £25 per year ground rent But the lease on the land has 58 years remaining so no one can get a mortgage on it as I wish to sell the flat and I've been advised the leases is around £12,000 plus solicitor fees to extend for another 100 years but I think if I extend I will not get the £85,000 back and the flat next door has just sold for £65,000 cash sale so do I extend and see what I can get or do I sell to like say auction with a reserve or so at say £65,000 hope u can help me out with this

Thank you

eddddy · 19 February 2018 at 8:04PM

The best plan would be to ask 2, 3 or 4 local estate agents for a market appraisal.

Ask them what they think the flat will sell for with or without a lease extension.

(Local EAs who know the property market in you area are likely to be able to give a better opinion than most of the people here.)

Then, obviously, you need to compare that to what a lease extension would cost to help you decide on the best route.

Edit to add...

To be honest, you're almost certainly going to do better by extending the lease. If you don't, whoever buys will extend the lease anyway.

Steven74_2 · 19 February 2018 at 8:10PM

Thank you eddddy I've asked a few they said the same £85,000 with the ext £65/70,000 without and the ext is £12,000 up to now it will b slightly more next yr plus around £1,500 solicitor and about £300 surveyor fee

Annie35 · 19 February 2018 at 8:12PM

I'd try to find out more about your neighbours sale, it could've been a repo or delapidated, or just that it had the same short lease & that's just it's value without extending.

Check out sold prices in any similar blocks to get a better idea of similar values & then get a few estate agents round.

Steven74_2 · 19 February 2018 at 8:14PM

Hi Annie the flat next door wasn't a repo and was in good condition he just sold it to a cash buyer as he didn't want to extend I'm in exactly the same boat as him

G_M · 19 February 2018 at 8:32PM

So next door sold for 65 with the same lease as yours (58 years).
If you pay £12K to extend, you can then sell for £85.

So by paying 12K you get 20K more on the sale (and a quicker/easier sale too).

eddddy · 19 February 2018 at 9:11PM

Are you talking about a statutory lease extension? That would add 90 years to the lease term at zero ground rent.

By definition, getting a statutory lease extension should be good value - because you only pay 50% of the marriage value, plus a bit on top.

So, if a lease extension adds £20k to the value of a flat, you should be paying a bit over £10k for the extension.

Steven74_2 · 19 February 2018 at 9:24PM

I'm not sure I'm waiting on the relevant paperwork I'll have a read and repost it

Richard_Webster · 20 February 2018 at 4:59PM

Did your solicitor warn you about the consequences of buying a 64 year lease when you bought the place - that you would have to pay quite a lot of money to extend it. At 64 years a lot of lenders wouldn't have given a mortgage on it in 2011 and you should have been told that. If you had no warnings of that nature, sue your solicitor.

Flats with 58 year lease will sell from time to time to people who don't take advice or got to "online" solicitors whose systems don't allow for this kind of necessary explanation. Their value is always uncertain and frankly most estate agents won't understand the issues and usually, there will be few true market comparables for price.

kingstreet · 20 February 2018 at 5:23PM

Steven74 wrote: »

the lease on the land has 58 years remaining so no one can get a mortgage on it

That's not true.

I can think of several lenders who will do mortgage term plus 30 years, so a 28 year mortgage would be fine.

I have actually done a mortgage on a 56 year lease. We remortgaged after two years and bought the freehold. This was a house BTW.

A statutory lease extension as noted already appears the smart idea.

eddddy · 20 February 2018 at 5:34PM

Richard_Webster wrote: »

Flats with 58 year lease will sell from time to time to people who don't take advice or got to "online" solicitors whose systems don't allow for this kind of necessary explanation. Their value is always uncertain and frankly most estate agents won't understand the issues and usually, there will be few true market comparables for price.

Actually, I'd say they sell to people (e.g. investors) who are looking to make a bit of profit by buying the property and extending the lease.

Estate agents I deal with are fairly 'on the ball' with valuing short leasehold properties. They know what a flat would be worth with a long lease and they know what a lease extension would roughly cost, and they know what 'profit' an investor would be looking for.

One estate agent I came across recently 'specialised' in brokering 3 way deals. He would be selling on behalf of a leaseholder with a short lease, negotiating a lease extension on completion with the freeholder - and therefore marketing the property as having a long lease on completion.

Leasehold

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