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  • FIRST POST
    • sofa_searcher
    • By sofa_searcher 12th Jul 18, 9:23 PM
    • 24Posts
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    sofa_searcher
    Extending a Lease as potential buyer of a property
    • #1
    • 12th Jul 18, 9:23 PM
    Extending a Lease as potential buyer of a property 12th Jul 18 at 9:23 PM
    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.
Page 1
    • eddddy
    • By eddddy 12th Jul 18, 10:28 PM
    • 7,183 Posts
    • 7,132 Thanks
    eddddy
    • #2
    • 12th Jul 18, 10:28 PM
    • #2
    • 12th Jul 18, 10:28 PM
    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?
    Originally posted by sofa_searcher
    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.

    What are the pros and cons and Is there any cost on my part?
    Originally posted by sofa_searcher
    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.

    For example a flat that i like is on sale for £130k with 49 years left. How much approximately will a lease extension cost?
    Originally posted by sofa_searcher
    Try: http://www.myleasehold.co.uk/lease-extension-calculator

    Are the chance low that the term of the new lease will be poor?
    Originally posted by sofa_searcher
    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.
    • Tom99
    • By Tom99 13th Jul 18, 3:08 AM
    • 3,016 Posts
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    Tom99
    • #3
    • 13th Jul 18, 3:08 AM
    • #3
    • 13th Jul 18, 3:08 AM
    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.
    Not sure if that will satisfy your mortgage co though.
    • sofa_searcher
    • By sofa_searcher 13th Jul 18, 6:49 PM
    • 24 Posts
    • 2 Thanks
    sofa_searcher
    • #4
    • 13th Jul 18, 6:49 PM
    • #4
    • 13th Jul 18, 6:49 PM
    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.
    Not sure if that will satisfy your mortgage co though.
    Originally posted by Tom99
    This will ideal, i'll have to speak to the estate agent to see if the seller is willing to submit the S42 notice
    • sofa_searcher
    • By sofa_searcher 13th Jul 18, 8:25 PM
    • 24 Posts
    • 2 Thanks
    sofa_searcher
    • #5
    • 13th Jul 18, 8:25 PM
    • #5
    • 13th Jul 18, 8:25 PM
    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?
    • Tom99
    • By Tom99 14th Jul 18, 1:39 AM
    • 3,016 Posts
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    Tom99
    • #6
    • 14th Jul 18, 1:39 AM
    • #6
    • 14th Jul 18, 1:39 AM
    This will ideal, i'll have to speak to the estate agent to see if the seller is willing to submit the S42 notice
    Originally posted by sofa_searcher

    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.
    The big question is whether you would get a mortgage on the unextended lease, speak to a broker.
    Last edited by Tom99; 14-07-2018 at 9:33 AM.
    • eddddy
    • By eddddy 14th Jul 18, 9:30 AM
    • 7,183 Posts
    • 7,132 Thanks
    eddddy
    • #7
    • 14th Jul 18, 9:30 AM
    • #7
    • 14th Jul 18, 9:30 AM
    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.
    Last edited by eddddy; 14-07-2018 at 9:38 AM.
    • strawberries1
    • By strawberries1 16th Jul 18, 2:25 AM
    • 727 Posts
    • 148 Thanks
    strawberries1
    • #8
    • 16th Jul 18, 2:25 AM
    • #8
    • 16th Jul 18, 2:25 AM
    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.
    The big question is whether you would get a mortgage on the unextended lease, speak to a broker.
    Originally posted by Tom99
    If the S.42 is not served until after exchange how does one guarantee it will be served and assigned?
    • Tom99
    • By Tom99 16th Jul 18, 3:21 AM
    • 3,016 Posts
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    Tom99
    • #9
    • 16th Jul 18, 3:21 AM
    • #9
    • 16th Jul 18, 3:21 AM
    If the S.42 is not served until after exchange how does one guarantee it will be served and assigned?
    Originally posted by strawberries1

    Both are made a specific term of the contract.
    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........”
    • strawberries1
    • By strawberries1 17th Jul 18, 1:57 PM
    • 727 Posts
    • 148 Thanks
    strawberries1
    Both are made a specific term of the contract.
    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........”
    Originally posted by Tom99
    Thank you! Done.
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