83 years left on lease, but...

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Hi everyone. I've had an offer accepted on a flat, but have realised that there's only 83 years left on the lease.

The property is shared freehold (co-freeholder is downstairs flat) so the estate agent is saying extending the lease would be negligible effort, very simple, very cheap, just a formality etc etc.

I've read that this is generally the case... except when it isn't, and that things can get complicated, especially if there's been a breakdown of communication between co-freeholders. This could potentially leave us with an unsellable/unmortgageable flat, at least until it gets resolved: I understand that some lenders are reluctant to lend when the lease drops to 80 and most won't lend at 70.

This is an expensive flat and I'll be taking on a big mortgage. All the other shared freehold flats I viewed had hundreds of years left on the lease; everyone seems to extend it to 999 when they buy the freehold. I don't know why this one is so short, and, if it's so trivial to extend it, I don't know why the vendors haven't already done it. I don't think we can apply to extend the lease until we've owned the property for 2 years (?).

Most of all, I'm really wary of getting stuck with a property that I can't sell, or whose value massively drops (this is in London, so it's not like the market is filling anyone with confidence).

Help! Am I being too cautious, or is this a legitimate concern? Are there any work-arounds? I will speak to my solicitor, but would really appreciate any advice from people who've dealt with similar.

It's a legitimate concern, in a few years time extending the lease would become very expensive. Is the current owner unwilling to do it? Obviously the price of the property will increase to reflect the value of the longer lease.

Talk to the people in the downstairs flat. Check that they have the same length lease too....

You do need to own it for two years before extending, however you could ask the vendor to put this through as part of the sale - or to raise enquiries as to how much it will be. Once it goes under 80 years the cost can go up considerably so you need to aim to do it before then.

Is the property cheaper than other equivalent properties which have a longer lease? If yes, that's your answer.

I'd step away unless this is the only flat that you love. You could ask for a (huge) discount to reflect the charge that you will face to renew the lease.

I would get your seller to extend the lease as a condition of sale. If they can't/ won't, take advice from your solicitor- it might be better to walk away.

I agree with PP - the vendor should extend the lease prior to selling to you. He/she will find this to be an issue whoever the buyer is (except for a cash buyer perhaps)

Otherwise walk away. There is always another home to buy.

Thanks for the responses. I did check the Land Registry entry for the property, and downstairs and upstairs have the same length lease. It looks like both owners bought the shared freehold at the same time, and extended the lease for 99 years.

I don't understand why 99, though; 999 is much more common when buying shared freehold around here (not to mention more secure). It makes me wonder if there's some hidden catch: a lease which can't be extended more than 99 years? A co-freeholder who's reluctant to extend (is 99 cheaper than 999?)?

I like Sunshine's idea. Get the seller to extend the lease as a condition of the sale.

You may well find that there is a problem. You don't want it to become your problem.

Let us know what happens please.

Yes if you are joint free holders it's just the cost of legals to sort the paperwork as you have no leaseholder to pay compensation too..... as you are the leaseholder.

Get them to extend it as part of the sale..... even if you offer to pay the legal costs, as it really doesn't add much more. Then it's all sorted and less headache for you.

We did this when we sold our flat after purchasing the freehold and we had less then 60 years left.

Estate agent is talking to the vendor about them extending the lease, btw, but he thinks they won't be keen. We are FTB and they're in a chain, and they don't want any delays, especially as a previous buyer pulled out. I am sympathetic to their situation, and we do really want the property - but not enough to take on a huge risk.

I don't think the shorter lease is reflected in the price. Estate agent is still being quite 'oh, it's shared freehold, the lease is trivial, don't worry'. I do wonder if this is what prompted the previous buyer to withdraw.

It looks like extending the lease as a condition of sale is the way to go. We would be open to negotiating who pays the legal costs. But I think it's the potential delay which is really an issue for the vendor. I don't know if they'll stick with us, or decide to put the place back on the market.

Thanks, everyone. I will update!

I suspect this is the reason that previous buyer withdrew.

Please remember that the estate agent is acting on behalf of sellers so will not be looking at this from your POV he just wants sale to proceed asap so he gets his money.

Of course there is a chain so it is up to the sellers to do what they should in order for sale to proceed smoothly as they will be with ones holding up the chain if they don't extend the lease.

Stick to your guns and best of luck.

I extended a lease to 999 when I sold my previous flat - it did not add to the sale length time- at all - I can see no reason for reluctance on the seller to do this as it is very likely to be asked by every purchaser so I would definately make it a condition of the purchase.

Extending the lease in a joint freehold costs nothing other than solicitors fees. Both leases are the same length at the moment and Typically both you and the other leaseholder will extend at the same time by the same amount to keep parity. I assume there is no ground rent ( you would just be paying yourself as freeholder and leaseholder), and no premium to extend the lease ( both you would and the other other freeholder are extending so one party’s premium would cancel out the others).
With a joint freehold with both leases the same lenght it is no more expensive to extend now or in 20years time ( other than solicitors charge more with inflation).

My personal experience is that 999 year leases are usually found in modern blocks whereas 99/125 years is more standard for older properties. A lot of the time, people reset the old lease to the original lease length rather than serving notice to the freeholder (which forces the ground rent to zero and adds 99 years to the number already remaining - or at least, it did in our case). The informal route can be cheaper but more problematic if you can't agree on a price. Not sure how share of freehold affects this.

But the main question is: was the flat priced accordingly? Did the price reflect the shorter lease length?

I also expect this is why the previous buyer dropped out. Take the EA with a pinch of salt. Perfectly reasonable that the vendor should extend the lease.

Going back on the market will delay things further. They’ve already lost one buyer, are they really going to risk this again?

I would send them links to websites highlighting the problem and say this is a problem that would affect any buyer and so extending it is a condition of your offer.

Besides, if it’s so easy and trivial why won’t the seller do it?!

This is a very legitimate concern. The estate agent does not have your best interests at heart, they want the sale to go through so they can pocket their commission. Please make it a condition of sake that the lease is extended. Speak to your solicitor for advice. Be careful. Please.

What would happen like in this case with joint freeholders if the lease got to zero?

As a ftb, you are in a strong position, tell then to extend or walk away. It will be quicker than then finding another buyer

Don't believe a word the estate agent says without formal written proof. An EA's responsibility is to make a sale. Your solicitor's responsibility is to look out for your interests. You need to be very cautious and be prepared to walk away if this isn't resolved. I agree that getting the lease extended is a perfectly reasonable condition to require before committing yourself. If they won't agree to that then they are lying about how easy it would be.

We had this situation; we stipulated that the lease was extended as part of the purchase.
It took 6 months from offer to completion, but that was mainly due to an issue with the plans, which we had to get re-drawn.
The only reason it should really take longer is if the other freeholder refuses to sign / is not contactable.

Ensure that you aren't just buying the lease but their share of the freehold too, then the length of the lease becomes unimportant (as you are leasing it from yourself).

Even if you are buying a share of the freehold the length of the lease still matters. It is normal for older flats to have leases of 99 years. The flat I bought a few years ago had about 79 years left on the lease, I was advised by the mortgage company to get it extended which I did as a condition of purchase. I had to do this even though I was buying a share of the freehold. The new lease was 999 years. If the freehold is shared among the owners then the costs of doing this aren't that high.

Mortgage companies don't like leases with less than 50 years to go (on a standard mortgage) at the end of the lease because they know that they are much harder to sell. So at 75 years or less they will be reluctant to lend or will ask that you get the lease extended as a condition of the mortgage. The mortgage company is looking to make sure they get their money back whenever you want to sell. A property with only 70 years left on a lease is actually less valuable than the same property would be with 99 years left.

Update!

The vendor has spoken to their solicitor, who confirmed that it should be relatively simple to extend the lease, and they’re proceeding with that ASAP. It should be done before completion. I’ll keep a close eye on its progress (or my solicitor will), but the vendor has been quick to act and co-operative, which seems like a good sign.

Less impressed with the EA. I know he’s trying to protect the sale, but he was incredibly tetchy about this, and tried to make out that I was being crazy: ‘nobody cares about the lease if you have shared freehold, it’s a non-issue’. At one point he began hinting that the vendor would pull out if we pursued this, because ‘it just gives a bad impression, making demands like this - they’ll be concerned that you’ll be asking for more and more stuff’.

AFAIK, LondonMischief is right. As co-freeholder, I shouldn’t be looking at any escalating costs to extend the lease, even if it drops below 80/70/60 years - just solicitor fees. Again, just AFAIK, but even if the lease got down to zero it wouldn’t have immediate practical repercussions until I wanted to sell or remortgage, or got into some dispute with the co-freeholder.

But it’s all about the mortgage lenders, as many posters have pointed out. I still don't fully understand why banks care so much about lease-length in a shared-freehold property, but they obviously do. I can’t put my life savings into a property flat is guaranteed to lose a huge chunk of value, within the near future, unless action is taken. The risk of the lease extension getting complicated are low, but the consequences are huge.

Anyway - I’ll update again if anything interesting happens, but thanks to everyone for all the info.