Short Leases

[BackforGood]

My ds is looking for his first property and thought he'd seen something he could afford. When I had a look, the lease only has 48 years to run.

Now, it is 35 years since I was in his position, but I seem to remember that a mortgage lender won't lend under X year on the lease ? (can't remember how many).

If it matters, it is a maisonette - like a semi detached house but built as 4 maisonettes, so not a big block.

Can anyone help us know how bad a buy this would be, and why.
Or how he could find out about buying the freehold or getting the lease extened etc etc ? Is it really a "don't touch with a bargepole" or is it something that is realistically redeemable ?

Thanks

Does he already know how much it will cost to extend the lease? That would be my first question and ultimately what dictates whether it's a bad buy or not. Sometimes you may be looking a pennies (not literally, but in the scheme of things) other times leases can be thousands upon thousands.

A property with a short lease is far less attractive to buyers and will command a lower price than one with a decent amount of time left on it. As such this would raise the question as to why the seller hasn't extended it prior to selling as presumably they would get a much better price for their property and attract a greater pool of buyers.

It could be that the cost to extend the lease is extortionate, which will need to be factored into purchasing costs.

I'd suggest going back to the agent and getting that information if you haven't already. It would be unwise to proceed without it.

I’m pretty sure lenders won’t lend on anything under 80. The cost of extending massively increases at the 80 year point too.

Pretty much any high street lender won't accept that length of remaining lease term. It gets more expensive to extend the lease the shorter it gets too.

Don't buy it unless the seller extends the lease whilst the conveyancing process is ongoing.

No- move on. Theoretically he could extend the lease, but with so few years remaining it will cost loads. And it’s not straightforward with many potential pitfalls, for example if freeholders play hard ball. I speak from experience.

Thanks.
I knew (but from vague memories) it wasn't a 'goer' as it was, but thought I'd check if there might be a realistic chance of somehow making the lease 'right'.
Thanks for your help.

Out of interest, say either the vendor can't sell, or a cash buyer comes along, what happens in 48 years, when the lease runs out ? Do the bricks and mortar become the property of the land owner?

I'm just pondering now, as not in a position to go down that route, but if you had the cash and let it out fr 48 years, you'd still be able to make money from it, even if you lost it in the end, I presume ? So there might be a niche market there.

It's cash buyer only for a lease that short. Once the leasehold has been owned for 2 years the lease can be extended.

It would be extremely expensive though!

Walk away.

Under 100 years I would walk away

It goes to the freeholder when the lease runs out, my gran owns a huge 3 bed London flat and the lease has run right down to about 8 years, she refused any help over the years to extend so she will lose it soon and the freeholder is quids in.

And apparently , if the freeholder is absentee/ dead with no estate, it goes to ....Prince Charles. That’s what my solicitor told me when I was extending my lease with absentee freeholder.

Thanks all

It's not always expensive to extend the lease, we paid about £300 to add another 99 years onto our old flat.

Oh..... that's interesting @PronkWine.

Something that would certainly be worthwhile. I have asked the question as I didn't know if it was beyond all possibility, so didn't want to ask the Estate Agents if the vendor had looked into it if I was being ridiculous.

Run, don't walk, away.

Easy to check cost on leasehold advice site. It has a calculator on it and you pay all legal fees...worth a look !

OP I can bet its not going to cost 300 nowadays, on the flat your DS is considering - don't get your hopes up .

The lease is extension roughly costs what a somilar flat there costs with a long lease over a 100yrs. And yes, if the flat is in a very expensive area, it can be a good buy to let for a cash buyer (in London unfortunately this applies also to many dodgy buyers who are hiding their cash that way - with an intention to eventually lose the flat having made income).

Otherwise it's the market for an older person who doesn't have anyone (or doesn;t want) to leave inheritance for, and this way can afford a prime location flat which otherwise they couldn't buy.

Sorry, I meant of course that it costs roughly the difference in price with a similar long lease flat, might be a little less as you'd spend on solicitors too.

I walked away from a flat with a lease of 87 years

Cost of extending the lease was about £5500

Not a good idea to ask the estate agents anything about this. They want to make a sale and will bend the truth/ lie to do that.
You could have a go at a quick calculation here www.startleaseextensions.co.uk/?gclid=EAIaIQobChMIzJKpyPmV7QIV6-jtCh27ZgEYEAAYAyAAEgKXy_D_BwE

I would definitely ask the agent to enquire with the seller if they will be willing to extend the lease. It can be done alongside the conveyancing. If it is such a good buy then you may decide to offer 50% of the cost towards it but I would go for asking the seller to pay. Costs vary wildly but there is a form in Sheffield that specialises in negotiating with the leaseholders on the fee of it is extortionate. If your son decides to go down this route feel free to PM me!

I wouldn't run away, if you take some good advice and feel well informed then your son can make a decision on what's right for him.

PP are right though I think it's sub 87 years lenders won't lend.

One thing to bear in mind is if you do go fine that route make sure it is extended by long enough that your son won't have the same issues when he's trying to sell!

Thank you all so much

We viewed somewhere with 68 years on the lease a few weeks ago. We mentioned it when we did mortgage offers for somewhere else, and got told nobody would lend without at least 70 years on the lease, and that was based on us only getting a 30 year mortgage - the rule they said was mortgage length x 2 + 10 years.

The seller did say they were willing to extend the lease but they wanted the buyer to pay 60%, which was about £5k. We didn’t want to offer on the place so we didn’t push it to see if there were other options.

OP I can bet its not going to cost 300 nowadays, on the flat your DS is considering

This was only 2018, we kept the flat as a BTL after we bought a house

What is the flat selling for? How much would it sell for with a long lease?

I am a freeholder and I will give you an example of a recent lease extension here.

Flat had 64 years left. Worth about 130k with the lease length, worth about 155k with the longer lease. The statutory lease extension (which is to add 90 years on to the original lease and make £0 ground rent) cost £14,600 plus all the legal fees and valuation fees. I think it was approx 4k for legal fees and the valuation was £500. You would be liable for your legal fees and the freeholders legal fees.

Actually it reverts to an assured tenancy when it expires, so a market rent is payable, but if you live there they can’t evict you!

I am selling my dads flat with 34 yeeras left on lease.
The lease can only be extended by the current owner, who has to have been in situ for two years. I advertised it as extendable at the buyers expense, but, ultimately sold it way below value as it needed a considerable amount of work done.
BUT, WHAT I DID LEARN: we applied for an extension to lease. We needed to pay £160 for them to provide us with a figure, but we bit the bullet and did so.
We were quoted 24k
I then researched ad nauseum.
Replied to them asking them to reconsider, quoting a Government sponsored website calculator ( will post a link in a mo), and using all the keywords.
They replied a week late saying okay, how about 11.5k then???
Con merchants the lot of them!

As it happens, we sold to a buy to let investor who was not othered about length of lease.