Short leasehold on a flat - always avoid?

[NigellasGuest]

Very often, London flats are on the market for less than normal due to not having very long left on the lease. Is it always a bad idea to consider purchasing such a flat? Who DOES buy them - are they property developers or legal types who know their way around this?

I guess what I’m really asking is, would I be foolish to consider a shorter lease in my keenness to get a bit of a bargain? Looking for one bedroom as central as possible for under £500k.

As a ballpark, what would the flat cost if you bought it with a virtual freehold. So if you're looking at a flat for £300k and normally the same flat would cost £1.3k it will cost at least £1m to extend the lease. You will need to pay fees (both legal and surveying) and it can be very contentious. Not necessarily a bad idea just go into it with your eyes open.

It shouldn't cost £1m to extend in that scenario, it should be somewhere between the price you paid - £300k - and the price it would be worth with a long lease - £1.3m plus legal fees which can be capped if it goes to the Leasehold Valuation Tribunal. In a falling market it can be a cheaper way of getting a good flat but, as others have pointed out, it's for cash-buyers only.

Yes don't expect it to cost 20k. My friend extended a 57 lease on a low value flat out of London and that cost 20k a few years ago!

Can i just ask, what happens if you are still in the property on the day the lease expires? Is it like rented where the leaseholder evicts you?

You would have the right to continue to live there paying market rent but only, iirc, for a limited period (possibly a year). I once spoke to a surveyor who says he gets contacted to act on behalf of people with only a couple of months left on the lease .

So overall i suppose in the OPs situation its possibly worth having 20 years of living rent free (whilst also then being smack bang in the city and able to save).

But it’s not rent free as they’ve had to pay for the flat in the first place! Though I suppose if it is £500k then that’s just over £2k a month...is that good for a flat in that location?? But then would be management fees etc...

My parents extended the lease on their flat - cost them about £10k.

This is definitely a bad idea then. If extending the lease is going to bring the total cost to the same as just buying a flat with a decent length lease, then it’s a no brainer. Not least because I would like to be able to leave the place to the DCs once I’m gone.

I would be downsizing so would be a so called “cash buyer” btw so that aspect is not a problem, but this thread has opened my eyes about the actual implications of a short lease. I knew there had to be a catch because those cheaper places on Rightmove with short leases would not stay on the market very long at all otherwise. The fact they tend to stick on the market a while and being in central London as well, is a definite red flag!