Short Lease : buy?
Discussion
I'm looking to buy a flat that seems to have a short lease left (only 62 years). The owner of the freehold is very old and isn't interested in extending it seems.
If I buy the flat, I can 'force' her to extend the lease? It seems more trouble than it is worth and the current owner just wants to sell the flat without doing anything.
Any suggestions appreciated.
If I buy the flat, I can 'force' her to extend the lease? It seems more trouble than it is worth and the current owner just wants to sell the flat without doing anything.
Any suggestions appreciated.
I sold my flat in February with about 64 years left on the lease. I wanted to get shot of it without renewing the lease, which I managed to do. I had lots of offers, which where then retracted once their mortgage company found out. Mortgage companies shouldn't be worried at 60 years on a 30 year mortgage, but they are, for whatever reason known to themselves.
I did make enquiries to see how much it would cost to renew, just so I had an idea what my lowest selling price would be. They came back with £17,250, so with solicitor costs etc it would set me back around £20k.
Knowing what I now know about leases, I would walk away from a flat that had less than 80 years on it (that's when marriage value kicks in when renewing the lease).
There's a link from the Direct.Gov website to calculate a lease renewal cost.
I did make enquiries to see how much it would cost to renew, just so I had an idea what my lowest selling price would be. They came back with £17,250, so with solicitor costs etc it would set me back around £20k.
Knowing what I now know about leases, I would walk away from a flat that had less than 80 years on it (that's when marriage value kicks in when renewing the lease).
There's a link from the Direct.Gov website to calculate a lease renewal cost.
Thank you for your help. The mortgage should be okay.
My question was more about whether I'm going to be stuck with problems in that the freeholder doesn't seem to want to extend, but she legally has to? I vaguely know her in that she lives close but she is old and has some bizarre idea that she can block and then everything will revert to her grandchildren.
(I also offered to buy the freehold for the entire building, but again not interested)
My question was more about whether I'm going to be stuck with problems in that the freeholder doesn't seem to want to extend, but she legally has to? I vaguely know her in that she lives close but she is old and has some bizarre idea that she can block and then everything will revert to her grandchildren.
(I also offered to buy the freehold for the entire building, but again not interested)
Yes, you have to have lived in/owned the property for 2 years before you can renew.
The Lease Advisory Service is the place to look, and I would strongly recommend you read what they say before you go down the route of buying the flat as you could quite easily be out of pocket.
http://www.lease-advice.org/publications/documents...
The Lease Advisory Service is the place to look, and I would strongly recommend you read what they say before you go down the route of buying the flat as you could quite easily be out of pocket.
http://www.lease-advice.org/publications/documents...
Planet Claire said:
Mortgage companies shouldn't be worried at 60 years on a 30 year mortgage, but they are, for whatever reason known to themselves.
Knowing what I now know about leases, I would walk away from a flat that had less than 80 years on it
You've answered your own question there Knowing what I now know about leases, I would walk away from a flat that had less than 80 years on it
It's a bit self-fulfilling, but the mortgage companies won't touch it as they know it would be a nightmare to sell on if you defaulted and they had to repossess, as nobody would buy it, as they wouldn't be able to get a mortgage on it...
trooperiziz said:
You've answered your own question there
It's a bit self-fulfilling, but the mortgage companies won't touch it as they know it would be a nightmare to sell on if you defaulted and they had to repossess, as nobody would buy it, as they wouldn't be able to get a mortgage on it...
This. The flat I am selling has a 73 year lease remaining and I am sorting an extension out which the buyers are paying for.It's a bit self-fulfilling, but the mortgage companies won't touch it as they know it would be a nightmare to sell on if you defaulted and they had to repossess, as nobody would buy it, as they wouldn't be able to get a mortgage on it...
Regardless of whether the landlord wants to extend or not, when you have owned the place for 2 years you have the statutory right to extend it so you can force the issue but it could be a reasonably lengthy process.
As has been said above, you have a legal right to renew the lease after 2 years of living at the property.
I wouldn't be blasé about securing a mortgage, this is a real issue.
We bought our flat with a relatively short lease - 79 years, it then took us a year to renew the lease owing to a very difficult freeholder who was just a complete arse to be honest. At the point we renewed we were down to 71, and the whole thing cost £21k including legals.
I have to say, I would never own a leasehold again if I could avoid it, unless of course it had 150 years plus unexpired term, at which point it would see me out, and if I were to pass it on to the family do them for quite some time too.
I wouldn't be blasé about securing a mortgage, this is a real issue.
We bought our flat with a relatively short lease - 79 years, it then took us a year to renew the lease owing to a very difficult freeholder who was just a complete arse to be honest. At the point we renewed we were down to 71, and the whole thing cost £21k including legals.
I have to say, I would never own a leasehold again if I could avoid it, unless of course it had 150 years plus unexpired term, at which point it would see me out, and if I were to pass it on to the family do them for quite some time too.
Thank you. I'm not being blasé about the mortgage, we are fortunate enough to just buy it.
Based on the information above and knowing much more about leases than I ever wished to, I reckon it'll cost £15k or so to get the lease extended.
I am trying to get this removed from the price of the flat.
Based on the information above and knowing much more about leases than I ever wished to, I reckon it'll cost £15k or so to get the lease extended.
I am trying to get this removed from the price of the flat.
boxst said:
Thank you. I'm not being blasé about the mortgage, we are fortunate enough to just buy it.
Based on the information above and knowing much more about leases than I ever wished to, I reckon it'll cost £15k or so to get the lease extended.
I am trying to get this removed from the price of the flat.
I bought a flat a couple of years ago with a very short lease - less than 20 years. I've owned it now for more than 2 years I'll soon start extending the lease which will time consuming and about 15 to 17.5 thousand £.Based on the information above and knowing much more about leases than I ever wished to, I reckon it'll cost £15k or so to get the lease extended.
I am trying to get this removed from the price of the flat.
The discount on the purchase price still makes it a worthwhile buy.
Worth pushing for the price reduction, being cash only cuts out a lot of potential buyers.
The other option is to pay the asking price but for the current owners to renew the lease for you as part of the deal. That way you don't have to wait two years to do it yourself (in which time the cost of renewing has gone up). This is what happened to a neighbour of mine who was selling up before I put mine on the market.
Remember, when any deal you have on your mortgage comes to an end it's going to be harder to find a better deal elsewhere as fewer companies will taken on a short lease. Therefore, check what your rates will be at the end of your fixed-term deal as you may well be paying them until you get the lease extended.
Remember, when any deal you have on your mortgage comes to an end it's going to be harder to find a better deal elsewhere as fewer companies will taken on a short lease. Therefore, check what your rates will be at the end of your fixed-term deal as you may well be paying them until you get the lease extended.
You don't even have to have the current owner complete the lease extension if he doesn't want to. I believe that you can ask him to file for the lease extension, and at some part of the process you can step into his shoes. Ask your solicitor about this, and exactly how far along the process has to be for you to be able to take over.
With regards to the lease extension, yes she has to grant you one, you'll have to pay her legal costs, though if you dont agree on the price you can take her to a tribunal, and I believe she has to pay her own costs for that.
Now we get to the part I'm a little more shakey with. I believe you could force her to sell the freehold if you get more than 50% of the owners on side, it would have to be priced up as the entire block though so you'd have to find the cash to buy out the shares in the people that don't want to buy their freeholds, and the buyers as a consortium would then effectively become the new freeholders of those flats. You'd still technically be leaseholders, but you'd have a 'share of freehold' and you would grant yourself a 999 year lease. The lease on the flats that didn't participate would carry on ticking down until the owners or new purchasers wanted to renew and would come knocking on your door.
With regards to the lease extension, yes she has to grant you one, you'll have to pay her legal costs, though if you dont agree on the price you can take her to a tribunal, and I believe she has to pay her own costs for that.
Now we get to the part I'm a little more shakey with. I believe you could force her to sell the freehold if you get more than 50% of the owners on side, it would have to be priced up as the entire block though so you'd have to find the cash to buy out the shares in the people that don't want to buy their freeholds, and the buyers as a consortium would then effectively become the new freeholders of those flats. You'd still technically be leaseholders, but you'd have a 'share of freehold' and you would grant yourself a 999 year lease. The lease on the flats that didn't participate would carry on ticking down until the owners or new purchasers wanted to renew and would come knocking on your door.
The current owner will have legal rights in getting the lease extended, just make getting this done as part of the sale.
One thing to be aware of is the ground rent, if it is currently pepper corn I.e. £20 a year then it might go up so worth considering.
If you buy without sorting a lease extension out you will not have the legal protection the current owner has for 2 years, this protection stops the freeholder demanding ridiculous amounts for extending the lease. I went through this and a prospective buyer was quoted £60k to extend the lease where we managed to it is for half that because of the legal protection. The 2 year period still applies for 2 years after the leasee had died so the estate can also benefit.
One thing to be aware of is the ground rent, if it is currently pepper corn I.e. £20 a year then it might go up so worth considering.
If you buy without sorting a lease extension out you will not have the legal protection the current owner has for 2 years, this protection stops the freeholder demanding ridiculous amounts for extending the lease. I went through this and a prospective buyer was quoted £60k to extend the lease where we managed to it is for half that because of the legal protection. The 2 year period still applies for 2 years after the leasee had died so the estate can also benefit.
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