I have found the perfect flat but ..

[Lacebug]

It has a 78 year lease. It is in a lovely position and feels as though you're in a treehouse and is just the right size for me but I am wondering if the shorter lease will cause problems in the future. Has anybody bought a place with a lease of this length and regretted it?

Treehouse

Can you ask the vendor to extend the lease as part of the sale deal? Ie your offer is conditional on them extending it prior to exchange/completion.

Mortgage lenders might have an issue with a short lease (not sure how long they will expect, when we saw a place with a lease of about 70 years we were warned it might be tricky to get the money).

You wont get a standard mortgage with a standard bank. You will need to get a specialist product from a specialist lender... will cost you more.
Always makes me wonder why people let the leases go below 80 years. Might be an absent freeholder

Are you a cash buyer? You’ll struggle to get a mortgage.

Could the lease be extended as part of the deal?

You won’t get a mortgage probably and the lease extension will be very expensive.

Why haven’t they extend fed the lease already? I would expect there to be problems doing so.

You can’t extend the lease until you’ve owned for 2 years, but the current owners can start the process and transfer to you to finish.

Basically this ‘perfect flat’ is only in your price range because it’s going to cost an arm and a leg to extend the lease. I wouldn’t go ahead unless you are experienced in these matters and have a significant extra sum of cash for the lease.

Don’t banks give mortgages as long as the lease is over 60 years?

Lease extensions start getting expensive as you get under 80 years but at 78 years unexpired, I’d expect it to be a few grand.

As MoveOnTheCards suggests, though, best to ask the vendor to extend as part of the sale.

And if you’re comparing this flat to others on the market, make sure you factor in the extra cost.

Aside from the lease issue, what the head height like in the property? It might be fine if you’re petite but might limit your re-sale market as taller people often feel pretty claustrophobic in attic flats (I’m 5’11).

You also need to be extremely careful with getting the roof checked out and seeing what the sink fund is/provision for repairing the roof if it starts leaking.

Make sure you check that flat out on a hot summer’s day. Attic flats can be unbearably hot.

PPs are right, you might struggle to get a mortgage. Plus, extending short leases is vvv expensive. I got caught out by this - my old flat lease was long enough when I bought it, but not when I wanted to sell, so I have to extend it, and it cost a whopping £22,000, once all the legal fees were included.

A lease extension for a flat with 78 years remaining wont be horrendously expensive, you are probably looking at less than 5k for yours and the freeholder surveyors and legal fees. The rest will be down to the value of the property and the ground rent.

We had this when we bought our first place and we requested the sellers extend it during the purchase process (we paid it). We paid about £2.5k if I recall correctly, and the lease I think was about 90 years remaining. A couple of years later a friend bought a flat in the same block, and they had to pay £10k to extend the lease. The freeholders have you over a barrel on pricing (I think you can go to arbitration, but that sounded like a pain!), hence why you want it done before purchasing. The lower the remaining years go, the more difficult to get a mortgage and a buyer, and the more the freeholder will want to charge you.

I think thee is a formula now that the freeholders have to follow when setting a price for a lease extension.

Yes, you can go to arbitration. The freeholder can’t just do whatever.

And also a very good point that TinklyLittleLaugh brought up. Depending on the insulation, the flat could be unbearably hot in summer or freezing in winter (that’s a particular issue with attic flats).

Thanks for the responses, I could ask if the vendor is willing to extend the lease although the estate agent told me that it was discounted to reflect the shorter lease.

I am only five foot tall so the ceilings shouldn't be a problem and the temperature seemed okay when I saw it on a warm day.

The question about ceiling height related to the easy of re-selling it, OP, most people aren’t 5’! It’s hard to tell from the pictures. Even if you think you’ll spend the rest of your life there, it’s worth considering what would happen if you needed to sell.

This page explains why extending the lease gets more expensive after there are less than 80 years left:
www.moneysavingexpert.com/mortgages/extend-your-lease/#howmuch

There is a calculator here - you will need to know roughly what it would be worth if it didn’t have a short lease, so you’ll need to do some research on sold prices. You also need to know the ground rent because that is factored into the calculation: www.lease-advice.org/calculator/
Remember that if you buy it at 78 years there will only be 76 by the time you come to extend because you have to own it for two years first. All bear in mind potential house price increases over the next couple of years. There is more advice on that website too.

I thought the estimates PPs have made sounded a bit low so I plugged some values into the calculator - I tried £190K and £200K with an annual ground rent of £25 or £100. The calculator estimates £14-15K PLUS COSTS, which will be a few thousand - your own valuation and legal fees and those of the freeholder. In my experience the calculators are accurate because there is an underlying formula that’s used.

As others have said, a shorter lease affects the ability to mortgage - some lenders won’t lend below 75 years. Even if you get a mortgage to buy now you need to think about the possibility of remortgaging in the future and the possibility of future buyers getting a mortgage.

So basically yes, there are issues with buying a property with a short lease. If you have the money to extend it then the issues go away. Even if you expect to die in the flat there may be some reason to move in the future that you can’t imagine now - life changes!

This does underline the madness of the leasehold system, especially with (still common in London ime) 99 year leases. Essentially properties become very difficult to sell after about 15 years.

Once a lease goes below 80 years it will v likely cause problems with obtaining a mortgage and will also be rather more expensive to renew.
I would def. make renewal by the vendor a condition of the purchase.

You can probably find out the rough cost of renewal (there is a formula) via google. However a longer lease - a 99 year is the most usual - will increase the value of the property so it may be that your vendor would want to add the cost to the purchase price.

That looks like a very low ceiling over the toilet to me and I think that would affect the resale value. How long would you be planning to stay there, OP (if you have to be there a couple of years to extend the lease yourself).

If the lease is extended by the statutory means I described in my previous post, they will add 90 years to the existing lease (so it won’t become a 99 year lease or the the current lease + 99).

Thanks for the responses, I could ask if the vendor is willing to extend the lease although the estate agent told me that it was discounted to reflect the shorter lease.

The vendor must absolutely start the process for extending the lease by the statutory route. It doesn't matter that the price was discounted to reflect the short lease term - the vendor presumably won't pay to extend the lease, but you would, therefore the cheaper price reflects the fact that you would need to part with a few thousand to extend the lease term.

If the vendor doesn't get the ball rolling on the lease extension (presume they have owned for two years or more?), you will have to do it yourself in two years time, by which time the lease is reduced to 76 years.

There are lenders who will agree to lend - have a look at the Council for Mortgage Lenders Handbook www.cml.org.uk/lenders-handbook/ - Select England and Wales and then Part 2. For example, Bank of Scotland asks for 70 years, Fleet Mortgages 75 years. Some lenders are more generous, i.e. Royal Bank of Scotland wants 30 years remaining at the end of the mortgage term.

I do think you need to consider how easy the property will be to sell on in the future though.