Active discussions

Meet the Other Phone. Flexible and made to last.

Meet the Other Phone.
Flexible and made to last.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

Original poster

Leasehold Flat

34 replies

justwhy2022 · 26/01/2022 16:42

I'm in the process of buying a leasehold flat, ftb.

I was told to be begin with the lease was 99 years, but turns out its only 64. Now i'm told if I were to buy it I should extend the lease asap. The management company says it will be a premium of 9k including legal fees.

Now that is just about do-able, however I am reading things about 'Marriage value' and have done a few online calculators. Every where is telling me the amount is to be much higher than is quoted by the management company. If thats what they quote, is that correct or is there anything hidden about to pop up and give me a nasty fright? There are service charges but no ground rent.

Wondering if i'm doing the right thing by buying this flat...

Outside of central london and in a big block of ground and 1st floor flats.

OP posts:
areyouhavingagiraffe · 26/01/2022 16:57

You won't know the premium under you start the extension. My understanding is that you should insist on your Seller starting this process. If the lease is under 80 years it can be very expensive. The EA should have been honest about this. I believe that some Lenders will not lend if leases are less than 70 yrs. I don't know if you need a mortgage.
I know it sound horrible as you have your heart set on this, but the vendor and EA should have been honest and I would advise you walk away.

areyouhavingagiraffe · 26/01/2022 16:59

SOrry just re-read and noticed you say no ground rent. In which case it may not be that costly to extend. However, the lease length may be an issue to some lenders

ComtesseDeSpair · 26/01/2022 17:01

Have you advised your mortgage lender? That may be your main sticking point, most mainstream lenders require at least 70 years on the lease to lend.

If you do decide to go ahead then your conveyancer will be able to give specific advice on what you need to request from the management company and what the potential risks are. You would usually appoint a valuation surveyor as part of the process, and £9k sounds far too cheap, especially inclusive of fees, so you really need your conveyancer’s view.

Original poster
justwhy2022 · 26/01/2022 20:02

Been reading the marriage value is calculated by the loss of ground rent? If the ground rent is £0, i'm guessing this is the low quote then? Fingers crossed the quote is correct, as I do like the property!

OP posts:
ItsSnowJokes · 26/01/2022 20:07

Do you need a mortgage? It will be unmortgageable at 64 years remaining.

Depending on the price of the flat and ground rent you would normally be looking at 10-20k for that length lease for a statutory lease extension that will add 90 years on to the lease and make the ground rent zero.

The current owner can start the statutory lease extension now and you can then take it over. Otherwise you will have to wait until you have owned it 2 years before you can start the process but it will obviously be more expensive as it will be a 62 year lease then.

Go very carefully.

ItsSnowJokes · 26/01/2022 20:08

I should of added you will have legal fees to pay on top of the premium for both parties (you and freeholder) so add an extra 3-5k for those on top of the premium for the lease extension.

ConstanceL · 26/01/2022 20:12

When we sold out leasehold flat we extended the lease and added the cost onto our asking price. I wouldn’t buy a flat with less than 99 years remaining - if we were to ever buy another leasehold, and from what I can remember reading it will be hard to get a mortgage on a lease that low anyway. I hope it’s a rock bottom price if you do go ahead without an extended lease!

thedarkling · 26/01/2022 20:18

No don't do it. Ours was 89 when we bought it and we had to spend 25k on extending it before we could sell it on. Was a really pain but our solicitor told us it was 99 (we did complain if I recall but couldn't prove it.)

thedarkling · 26/01/2022 20:19

I tell a lie, they paid us a settlement but it was only a couple of 1000.

Devo1818 · 26/01/2022 20:24

I wouldn't buy a flat with 64 years on the lease, sorry.

Extending is costly and I would say more than £9k - much more. You wouldn't be able to sell it on without extending, but if you love it then maybe it is something you could do later. The shorter the lease the more expensive though.

Also check what you are paying. The value of a leasehold is 100% that of a freehold if it has 100+ years left on the lease. So yours is worth 64% the freehold price. Check equivalent properties to make sure you aren't overpaying.

Original poster
justwhy2022 · 26/01/2022 20:33

Really sad to be reading these posts. :( I don't understand though, if the management company are quoting £9k, surely that IS what it is?

I do agree it seems odd to pay only that on a 64 year lease...

OP posts:
MauveMavis · 26/01/2022 20:39

Caveat emptor.

If it's so cheap get the seller to do the renewal.

ItsSnowJokes · 26/01/2022 20:43

@justwhy2022

Really sad to be reading these posts. :( I don't understand though, if the management company are quoting £9k, surely that IS what it is?

I do agree it seems odd to pay only that on a 64 year lease...

The management company may not be the freeholder (I'm a freeholder and employ a management agent to run the building for me) so they won't know how much it will really cost.

There is a set formula for a statutory lease extension so you can use a calculator to give you a rough guide but know it is going to be more than 9k all in.

What is the flat worth with a long lease and what is the ground rent?

cloverleafy · 26/01/2022 20:45

Buying a property with a short lease is only something to be done by a buyer who truly knows what they are getting themselves into AND doesn't need a mortgage. I'd walk away.

EmmaH2022 · 26/01/2022 20:49

@cloverleafy

Buying a property with a short lease is only something to be done by a buyer who truly knows what they are getting themselves into AND doesn't need a mortgage. I'd walk away.
Agree

The potential cost is probably higher. They have also lied to you. They should extend the lease and put it back on.

Somebodywhoisnobodyreally · 26/01/2022 21:00

@areyouhavingagiraffe

You won't know the premium under you start the extension. My understanding is that you should insist on your Seller starting this process. If the lease is under 80 years it can be very expensive. The EA should have been honest about this. I believe that some Lenders will not lend if leases are less than 70 yrs. I don't know if you need a mortgage. I know it sound horrible as you have your heart set on this, but the vendor and EA should have been honest and I would advise you walk away.
Walk away. In a straight line to another estate agent and another property which has a much longer lease...
Original poster
justwhy2022 · 26/01/2022 21:20

If the lease is extended by the vendor, would you still suggest I walk away?

OP posts:
ComtesseDeSpair · 26/01/2022 21:22

If the vendor was willing to extend it then the flat would be worth more and they’d likely want that reflected in the asking price. Generally flats with short leases are being sold with short leases because the vendor doesn’t have the thousands / tens of thousands of pounds it will cost to extend themselves.

EmmaH2022 · 26/01/2022 21:29

@justwhy2022

If the lease is extended by the vendor, would you still suggest I walk away?
If it's actually done and complete, then no. But if they do it, the price of the property will go up accordingly. Does the property seem under priced? A short lease is often the reason something looks like a bargain.
Original poster
justwhy2022 · 26/01/2022 21:34

Other flats in the block that have been extended, have had an increase of approx 7k when on the market.

OP posts:
ComtesseDeSpair · 26/01/2022 21:38

If you really want to pursue the flat, have your conveyancer do some investigations. It’s impossible to advise with any surety here, we’re all just giving educated guesses. Without knowing when the other flats extended their leases, it may be that they are also relatively short.

movinghelprequired · 26/01/2022 22:25

You need to either get the seller to extended; or get them to start the process of extending. As pp says, if the process isn't started by them you'll have to wait years before buying to start it yourself. We just bought and did this.

But, all that said, I would be very wary of trusting costings you've been given. There's a whole process around these things and that seems low for just 63 years left. Even though our sellers stated the lease extension processes we didn't know agreed cost until we'd completed. We had a good idea but weren't sure. You've got more unknowns so you need to take v good advise - ideally from multiple sources.

movinghelprequired · 26/01/2022 22:26

You'll have to wait years AFTER buying to start the process Blush

Sarahbru · 28/01/2022 09:41

Short leases can be quite a complicated area and something I've ended up learning far too much about with my flat.

Sounds like the key questions you need to be asking the managing agent are - what is the extension they are going to be giving you and what will the new ground rent be? By negotiating with the management company directly, they can pretty much offer you any terms they wish therefore making the 9k premium either expensive or cheap. Do bear in mind that they can also change their minds at the last minute if they wish.

I put your 64 years into a short lease calculator ldn-properties.co.uk/short-lease/ and it's estimating your property to be worth approximately 80% of a freehold value with a 64 year lease. Am not sure how that compares with what else you have seen?

The statutory way of extending a lease is by serving a s42 notice and that will give you a 90 year extension with zero ground rent. In this scenario you would need to have owned the flat for at least 2 years though.

I'm not saying the management company is trying to reel you in here....but this is a scenario that could happen:

  • You buy the flat with a short lease believing that you can extend the lease for £9k
  • You then approach the management company to extend the lease and they change their mind and quote you say £20k (because they know you have no other option if you want to do it quickly)
  • You only choice then is to either pay whatever the management company demands or wait 2 years to be able to serve a s42 notice yourself and follow the legal framework of extending your lease which offers various protections

The only way it seems to do things completely safely here is to have either the current owner extend the lease with the management company before you buy the flat or have the existing owner serve a s42 notice (with the benefit assigned to yourself upon completion).

Sorry for the long winded reply! Just looking to share all possibilities. Any other questions, do let me know.

Ilovemycat13 · 28/01/2022 10:47

I haven’t read the whole thread, sorry. But I rushed to comment DO NOT BUY A LEASEHOLD. I had a leasehold flat and it was the worst 4 years of my life. Rising monthly maintanence costs, bills, and the last straw was the freeholder (who didn’t pay a penny) wanted to refurb the entire building. Each flat (8 of us) had to pay £4500 each, and the commercial unit downstairs had to pay the remaining 40%. Please re think your decision.