First time buyer, wanting to put an offer in on a flat with possible leasehold issue, help!

[GoldenZigZag]

The flat we have seen only has 86 years on the leasehold. So unless we make it a condition of sale that the owner extends the lease I'm doubtful any lender would touch us.

I'm new to all this buying lark so I guess my questions are:
a) how do you actually go about making an offer, do I just call the estate agent and follow up in email?
b) can I state at that point "we'd like to make an offer of £XX with the condition that the sellers extend the lease" is it sensible to make that clear from the outset or should we wait to see if our offer is accepted and then get into the particulars from there?

It sounds like these sellers have beenessed around a bit by two previous potential buyers so I want to get it right for them as well as for us.

*been messed around

As for making an offer you just call the agent - you don't have to follow it up with an email. Remember they work for the seller not you. Definitely say what any conditions are up front.
I have bought a flat with 87 years on the lease and there was no issue with a mortgage, but that was some years ago. It will cost some not inconsiderable amount to extend the lease and take time, and I doubt the sellers will do this depending on their circumstances. I believe you have the right to buy a lease extension once you have owned it for two years. Ask your solicitor about this (presumably you have one lined up and are pre approved by a bank). If you go ahead it would be good to know now approximately how much such an extension will cost.

Thanks for the prompt response, it's encouraging you were able to get a mortgage on one at 87 years.

The freehold is owned by the local authority (ex council flat) and the estate agent reckons it will cost in the region of 5-7k to extend, but as you say I'm not going to take their word for it.

If they weren't willing to extend it as a condition of the sale then I guess it would be fair of me to knock a sum off our offer (mind you the asking price is already reasonable and has been reduced once, perhaps in the knowledge that they have this potential leasehold issue).

We do have a mortgage in principle via a broker so may see if I can speak to them on Monday morning.

86 years isn’t a short lease. It only becomes an issue if it drops below 80yrs as that’s when lease extension costs start going up (but still would be ok for a mortgage).

Lease extending takes time to it’d make more sense to just get the 5k off the price as the vendor might not like to wait around for months while all the formalities are sorted out.

Are you in England?
Most lenders will lend on a lease of 86 years.
A lease extension takes months so the purchaser is unlikely to do it. Plus it will cost more than 5k.

I really doubt that it’ll be expensive if there’s over 80yrs remaining. I did that for 3k several years ago so the agent’s figure of 5-7k could be accurate. You’d just need to check that’s the actual quote the vendor has had.

Yes England (zone 3 London if that makes any difference).

I read that the other thing you can do is ask the current owners to give notice of intention to extend the lease, this then effectively stops the clock and the process for extending then transfers to us meaning we wouldn't need to wait 2 years to extend it.

Won't it have been priced with the "short" lease in mind though?

My DSis recently extended the lease on her flat, along with everyone else in the block. There were big arguments in court over the amount the leaseholder wanted to charge, and they eventually settled on £30k to increase from the remaining 75 years to something bigger (can't remember).
Be warned. The cost of extending will increase exponentially every year from now on.

SoupDragon it's difficult to tell as when I mentioned the price and recent reduction to the estate agent he said it was because the family are desperate to move (young family in one bed flat, impact of lockdown etc). When I mentioned it was a slightly short lease I got a kind of 'huh, I guess, but it's not that bad really' vibe from them - whereas I was half expecting them to say yes but that's reflected in the price.

That said it is on at a good price so if they wanted to mess about I bet they could backtrack and say it is reflected in the price.

I guess the only way to find out is to put an offer in and see!

As an aside I'm so nervous about this whole thing, I'm from quite a humble working class background so to be putting an offer in on such an expensive asset is giving me extreme imposter syndrome

Hi OP, once you've owned the property for 2 years you should be able to serve a section 42 notice on the freeholder and extend your lease by an additional 90 years. This is your right as a lessee. Beforehand you could also try to agree something with the freeholder via an informal route, though they are not obliged to offer you an extension. A lease length of 80+ years should be perfectly fine for most lenders based on my experience, the costs tend to increase once the lease length falls below 80 years.

On a separate note, while it's not legally required I would advise you to put any offer in writing to the agent. I hope this is helpful, good luck with your offer if you decide to make one.

Thanks Londongirl, really helpful

I suggest you ask the current owners of the flat to request a lease extension price from the current freeholders. Then you'll get an idea of price as I think it might shock you! They can extend it now the new owner needs to wait 2 years. Also remember you will be responsible for any repair on the block in the future. The local authorities will not charge the council tenants but try to recoup the cost through the private owners.
I know this as I had to sell my Great Aunts flat in Birmingham. We ended up extending before selling as there was 82 years on the lease and it cost 27K to extend to 999 years. Then we found out 6 months after the sale the new owner was presented with a bill for £17,500 for their share of works to the roof.
We sold the flat for peanuts but we were well rid. Leasehold is just a license for the freeholders to print money. But I do understand that sometimes it's the only way to buy in an area. If possible buy freehold!

Very good point from @Ohjustboreoff, potential repair costs in a mix of council and ex Council flats can be scary. That would worry me far more than the lease, which can be sorted, the resale because of this would worry me too.
And I've nothing against ex Council houses, excellent purchases just the maintenance issues with flats.

Nothing about the lease but if you’re buying a flat then it’s worth checking whether there is any cladding whatsoever and and if your lender would need a EWS1 form to lend on the flat. I’d ascertain this before putting any money into the process (eg surveys etc). It’s becoming a real issue that lenders are being incredibly strict about it and absolutely won’t lend without the form if there’s any hint of cladding. The form itself can only be issued by certain people and the wait for them at the moment can extend into years.

I only mention it as people are getting to the point of exchange (with all the costs involved) only for lenders to ask for the form at the last minute - even when they’ve already agreed the mortgage. It’s causing lots of sales to fall through at the moment (very nearly including ours...😬). It may well not apply to you but thought I’d mention in case. Good luck!

Freeholder and leaseholder here. A lease extension on a £500K property for example, could be around £40k. You also have to pay both sets of legal fees and possibly a third party if you can't free a cost. So upwards of £45K. Yes you'll get a mortgage but the EA is being disingenuous to suggest it's no big deal. You will want to sell at some point too. Don't walk into this with your eyes shut!

I would stay clear of the flat; so many out there why go for one which may cause loads of trouble and extra money?

Steer clear of leasehold altogether.

It’s a valid point about checking out the maintenance situation. It could get v expensive if a small number of private owners are expected to foot the bills for the entire block.

if the freeholder is the Council have your checked their website about lease extensions? Most have a section on it. At least their process will be clear and consistent which it isn't always with private freeholders. If the vendors are serious about selling they could start the process and then it is ready to be signed over to anyone who buys, although a council may not make you wait 2 years anyway....a London flat has a lot of competition at the moment so they should be making it as straightforward as possible for a buyer.

With so many flats in London on the market at the moment are you sure you want the hassle of somewhere that needs a lease extension and has the Council as a freeholder? Although you could perhaps get a good discount if you are willing to take that admin and cost of extension on and risk of the Council forcing expensive work on you (less risky about work if this is an older style house or maisonette rather than a block)

Having just extended a lease and then sold a flat, if there is anyway of buying something other than a flat - I would.

Vendors serving notice of intent to extend the lease is very common in London, they essentially pass to you their right to extend, no need to wait 2 yrs, so what you've heard is right, OP.
With private freeholders, finding out the cost of extension can take more than a month - but may be much quicker with the council, best to contact then and ask. It is a concern re maintenance as pp mentioned. At least find out from freeholder about any planned major works for the next year or for longer period if available.

86 years left is fine.

Have you looked up the specific requirements of your lender?

@PinkkLady

Steer clear of leasehold altogether.

It's nigh on impossible to buy anything in London that is not leasehold, unless you can afford a house (which most people can't).

Another one advising to check out the current service charges, particularly as the council is the leaseholder. My friend exchanged her Housing Association flat for one in Camden. Camden Council have taken over the maintenance. The costs are horrendous and rising. She is already in debt to them for £22,000.

I think there is a website where you can work out how much it would cost to extend your Lease. I would definitely find out a figure before putting in your offer.