Leasehold Flat - 100 years Remaining. Problem?

[NicoG]

Hello.

Found a flat for possible mortgaged purchase.

No official enquiries made as yet, but looks to be Purpose Built block.

Web details state "The property is held on the remnant of a 125-years from 1991"

So my maths makes that 100 years for arguments sake.

Also, looking at the buiding, it totally looks like it was built in 1991, so this will be the orignal lease I am assuming.

When do Mortgage companies start getting twitchy poopers about remnant Lease periods?
Last place was bought with 114 from memory and was fine, but what about 100...?

Should add that it's a share of the Freehold jobby, so what would it involve / cost to extend the lease if it ever bcame necessary £10K or £12 K ?

Shirley the others in the block are all in the exact same situation and, they seems to have been bought and sold fairly frequently over the last 5 years or so.

There's 20 flats in 5 acres of grounds in case that makes any difference for reasons I don't understand?

Thanks very much in advance.

Nico...

[toohangry]

Not a problem although what do you mean it's also a share of the freehold?

[CoolHands]

normal don't worry about it.

[Planet Claire]

Don't worry about it, 100 years is fine. Also, having a share of the freehold should help you when it comes to renewing the lease.

Costs start spiraling at 80 years and below - Google 'marriage value'. If you want to renew, then do it before you hit 80 years.

I've got rid of my flat in February with about 64 years remaining and the freeholder was quoting £17.5k to renew just up to 99 years! I had a few offers but they fell through when the mortgage companies found out about the lease. Obviously some mortgage companies don't mind (because I sold it on to a guy with a mortgage) but many get twitchy.

[ClaphamGT3]

Normally, no concerns flag until the lease term drops below 60 years

[neenaw]

From memory we were told when buying our flat that it started to become an issue if you would have less than 50 years left on the lease once the mortgage was paid off so pretty much anything less than 75 years would be an issue.

We've just found out recently from neighbours that quite a lot of them have 100 year leases that are due to expire in the mid-2050's. The ones who have spoken to the agents about renewing the leases back up to 100 years have been quoted prices around the £20k mark. Thankfully for us, the previous owners extended the lease for 999 years back int he early 90's so we're going to avoid the big bill!

[blueg33]

ClaphamGT3 said:

Normally, no concerns flag until the lease term drops below 60 years

In my experience its 80 years which is the typical perpetuity period in property.

[motco]

I had a flat in SW London and it was a new lease in 1984 - 99 years, so as it was heading for the magic seventy years (as I was advised) I investigated through banks and other lenders what their attitude would be to lending on it. Before the financial crash they said as long as it was longer than the normal mortgage period of twenty five years there was no problem. Now, though, they are back to being fidgety at around seventy to eighty years apparently. So I negotiated to extend the lease by 90 years about five years ago and it cost c.£15,000 all in. One hundred years is fine I'm sure.

Edited by motco on Tuesday 4th August 16:33

[NicoG]

Awesome - thanks so much for your responses all of you.

Just to address on or two things - I understood that "Share of the Free hold" (see text pasted below from Rightmove)
would mean that the service charges pay for the running of a management company who own the grounds and buildings Freehold?

From RM - "GROUND RENT: Each flat owns a share of the freehold. "

I did have it in my head that this should make things simpler if a renewal was required...

Also, I will be porting my current mortgage which has less than 18 years to run, so I guess that means it'll be comfortably above even 80 years remaining when it's paid-off...

lastly for now though - what is it that "sets the cost" of a lease extension / renewal? If it's just a ar$ehole freeholder then I can see that that might precipitate a high quote, but if EVERYONE in all 20 flats own a share, what is it that dictates the cost of this process?

Nico.

[motco]

The ar$ehole of a freeholder, as you so eloquently put it, will try to wring as much money out of you as possible. However there are guidelines and consultants exist to do the negotiating for you - at a price obviously. My first quote was hugely more than I paid and upped the ground rent from £60 p.a. to hundreds of pounds. And the overall term was only back to less than a hundred years. After my consultant chappie did his stuff I pay nil ground rent and have an extra 90 years (from memory). The costs are only guidelines and the freeholder will screw you if he thinks you're a naive innocent.

[Planet Claire]

Have a look at the Leasehold Advisory Service website for lots of useful information. They also have a calculator: http://www.lease-advice.org.uk/calculator/

[Pheo]

NicoG said:

Awesome - thanks so much for your responses all of you.

Just to address on or two things - I understood that "Share of the Free hold" (see text pasted below from Rightmove)
would mean that the service charges pay for the running of a management company who own the grounds and buildings Freehold?

From RM - "GROUND RENT: Each flat owns a share of the freehold. "

I did have it in my head that this should make things simpler if a renewal was required...

Also, I will be porting my current mortgage which has less than 18 years to run, so I guess that means it'll be comfortably above even 80 years remaining when it's paid-off...

lastly for now though - what is it that "sets the cost" of a lease extension / renewal? If it's just a ar$ehole freeholder then I can see that that might precipitate a high quote, but if EVERYONE in all 20 flats own a share, what is it that dictates the cost of this process?

Nico.

Not quite right.

Share of the freehold means there is no ar$ehole freeholder to worry about. Instead it is the 20 flats in the block are all joint/shared freeholders - you all have an interest.

This allows you to extend the leases by mutual agreement at a much lower cost. Provided you can agree with the other freeholders, which is likely, you should be able to extend the leasehold cheapily and easily for just the cost of the solicitors.

The cost of extending the leasehold is to compensate the landholder for the increase in value of the property in the meantime (as they can't make any money out of it!)

But in this case, you have a share of the freehold, so there is no freeholder to pay.

Seems like a good deal.

[KTF]

Pheo said:

But in this case, you have a share of the freehold, so there is no freeholder to pay.

Exactly. Assuming everyone agrees then all you pay is the legal fee to have the term extended.

[tobeee]

As said here, 80 years is the point at which marriage value starts to apply. Mine was extended at 58 years a couple of years ago, and legal costs for the negotiation were quite high (have to cover your own valuation etc. costs, and those of the freeholder!). For the record, adding 90 years to the existing lease on my 230K flat, cost approx 28K (24 lease / 4 legals).
Your 100 years is fine for a long while, but anyone else reading this thread should certainly make some enquiries if at 80 years or less remaining.