Very Grateful For Advice - Leasehold 120 Years

[AbbyGally]

A very good friend of mine has found a (fabulous) flat to buy. It is a 120 year leasehold. We know NOTHING about the nuances around leasing, should a 120 year lease be an issue with mortgage or resale? There are some minor annual maintenance charges and it's shared responsibility for the building. Is there anything else she should be asking?

Thanks to all in advance!!!

As far as I know (and I'm by no means an expert) it's only an issue at resale if there's only, say, 20 year left on the lease. Then you'd have a problem getting people to pay for it what you paid iyswim. Is it at the beginning of it's lease? If so I can't see it would be much of an issue.

120 years is fine. Pretty standard for new build flats these days.

I think the point where resale and mortgaging gets tricky is coming up to the 80 year mark because it costs much more to renew the lease after that time. Council properties that are sold to former tenants on the right-to-buy are routinely given a 125 year lease, so it is normal to find properties with around 110-120 year leases on the market.

If the building works are shared then it sounds like what she's got is "leasehold with a share of the freehold". Is that right? Ie freeholder isn't some separate person or organisation but is all the leaseholders together. FWIW I would consider this more attractive than a leasehold only option if I were flathunting.

120 years is fine, some mortgage companies are reluctant to lend on anything under 80 years. When you buy a lease, you're buying the right to occupy that property for x no of years, and at the end you have to give it back. The shorter the lease when you extend, the more it'll cost as obviously you're paying the freeholder off against an asset they would have had back in x no of years, when the lease is below 80 years this additional premium is known as the 'marriage value'.

If it's a property with a share of freehold, it means that the majority of the flat owners have got together and purchased the freehold, and they all own a share in the company which holds it (usually known as 'Property Name Freehold Co' or similar). You're still limited by the lease terms, but things like permissions to alter and lease extensions should be much cheaper and easier to administer. You don't have any more input in the decision making process however, unless you volunteer to be a director of the company at an AGM.

Oh, and whether you have a leasehold or share of freehold flat, you're still liable for your proportion of the communal maintenance under the terms of your lease - so make sure you find out when the last major works were carried out (internals/externals), how much there is in the reserve or sinking fund, what the yearly service charges are like, things like that - otherwise you might end up with a large bill unexpectedly and have to pay it.

Thank you very very much indeed!

Get her to check. You can get a neighbour"120 year lease" but some of the years have expired so the important bit is how many years are left.

I think it is less than 80 years remaining when things get awkward for getting a mortgage and also it changes your rights in relation to being able to buy the freehold. I cant remember all the details but it is worth checking what this situation with a freehold buy out might be. The neighbours will probably know. It is an advantage long term but it might mean your friend has to find a lump sum unexpectedly