Help! Buying Freehold but only 98 years left on the lease

[llyh]

We've found a flat we want and had the offer accepted but although we would own the freehold, there are only 98 years left on the lease hold. I know it's quite easy to extend to the lease when you own the freehold but the problem is us trying to get a mortgage on this. Can we ask that the owner does this there side before the sell? Does that happen surely if the own the freehold it should be quite straight forward. Or maybe I'm missing something. Appreciate any help or advice

I bought with 99 years on the lease - has the mortgage co said that the length of the lease is a problem? usually that's when it gets to 70 years or less

I’m so confused, is this leasehold or freehold? If you own the freehold then there shouldn’t be a lease to extend? Should there? Not an area I’m familiar with, despite having owned both freeholds and leaseholds in my time..

In terms of mortgage, with more than 90 years left shouldn’t be an issue with the mortgage.

There is no issue with getting a mortgage with 98 years left. It's under 80 years it becomes difficult (due to marriage value) but not impossible. Under 70 years very difficult.

Buy the flat, extend your lease once you have owned it a while. Are you a shared freeholder or a sole freeholder?

I've owned freehold properties and I've owned leasehold properties but I'm not sure how a property can be both. Can you explain for those of us at the back of the class?

I should have added. If the owner is currently the sole freeholder then it's not a long or expensive process to do. Will add approx £500 ish in legal fees onto their bill.

I know this as we did it when we sold our leasehold flat (we were sole freeholders and we did eventually sell the freehold)

I was wondering why the owner, if the sole freeholder, hasn't extended the lease anyway. That's pretty much the point of getting hold of the freehold (as well as getting rid of a management co and landlord).

Flats are mainly leasehold in England (different in other union countries), you will have leaseholders (say for example 4 flats in the block) and then you will also have a freeholder who will own the land the property sits on. A freeholder can be a single person, limited company, or you can have joint freeholders (say when each flat owner is a joint freeholder).

You will still have to abide by the lease terms even as a freeholder, but it makes it pointless as you wouldn't take enforcement action against yourself. When you have joint freeholders it can be trickier as you could get a majority to take enforcement action against any breeches of the lease.

You need to think of it in effect you have 2 hats. One leaseholder hat and one freeholder hat.

They might not see any point unless they are selling etc.... the lease at 98 years is still long enough to not really cause issues yet, and they have the security of knowing they can extend any time they want if they are the sole freeholder. If they are a joint freeholder they may have an arsehol of a joint freeholder who wants paying for the lease extension and they can't afford that cost, although with a 98 year lease that cost is small anyway, so they would just be being an arsehole by making them pay for it and what goes around, comes around when they need a lease extension as well.

Thanks all. Really helpful. We haven't had a flag yet from mortgage as waiting for the broker to come back to us on our options after the long weekend.

Good to hear that if its 98 it shouldnt be a problem.

We would be joint freehold. There is our flat and 1 other flat in the building.

So my understanding from most comments is. 98 years shouldn't be a problem. We can go ahead all being well with mortgage lender. And then once we own the house we can pay hopefully 500 or so to extend the lease hold?

For those asking more about how you can have freehold and leasehold. I'm not the best person to explain. Perhaps someone else here can do. But yes when you have the freehold there is also a leasehold.

Sorry everyone it's actually 89 years left. I got it muddled.

But if we share the freehold with another party. Is there a likelihood they could make it difficult to extend the lease. Maybe we could offer another 500/1k onto the property sale and ask the owner to extend the lease before the sale? I guess he'd be worried to do that incase something fell through?

You won't have the statutory right to extend the lease until you've owned it for 2 years - at this point the landlord (I appreciate you'll be joint landlord) cannot refuse so, even if there is an issue with the party jointly holding the freehold agreeing it informally, in two years' time they wouldn't be able to.

However, it is worth considering asking the seller to do it now if they've been there two years already.

You can either get them to extend the lease informally and not complete until the process is done or ask them to serve the statutory notice starting the process and assign the benefit of the notice to you on completion. You can then extend it straight away.

Go to the leasehold advisory service online. They have very good guides that talk you through the process and a calculator that gives you a rough guide to the premium you can expect to pay (the tenant is also expected to pay surveyors fees where a surveyor is instrusted, the legal fees of both sides and occasionally lenders fees if you're unlucky enough to have a lender who charges during a lease extension).

If you don't get the seller to extend the lease before you complete, make sure you extend it as soon as you can. The less time your lease has to run, the more expensive the premium gets, especially once it drops below 70 years.

Its 80 years when the price goes up as that is when marriage value is taken into account.

It depends what the joint freeholder is like. They may want paying for their share of the lease extension cost which could add on a bit. But even at 89 years left you have time to put in for a statutory lease extension which will add 90 years to your lease and reduce your ground rent to zero.

Going on a sale price of 250,00 with a long lease, with £50 a year ground rent then you would be looking at about 3,500 for a lease extension (plus legal fees) you would only pay half of this as you own the other half of the freehold. It really depends if the neighbour is an arsehole about it all or not. If you do purchase, I would purchase the deeds to the other flat (costs about £3) and see how long they have left as if its 89 years as well that could be a good bargaining tool. Maybe a negotiation of extending both leases to 999 years and no ground rent for just legal fees split in half would be enough to get them on board.

Just seen your question about extending for £500 or so. No if you do it separately at a later date it will cost more in legal fees. Probably about 2-3k in total. It is a lot cheaper to do at a point of sale as they are already doing lease checks etc..... as part of the sale.

I would ask if they would be willing to extend the lease as a condition of sale and see what they say.

Thank you. I just am trying to understand from what you say re getting the landlord to start the process or serve the statutory notice to the other freeholder and they don't have a choice vs other ppl saying if the other freeholder is an arsehole they could ask you for money or make it difficult.

Does the other freeholder have rights to ask us for money etc or does the statutory notice come into play.

Thanks so much. And if we do get the current owner to get the ball rolling. What would constitute as 'informally' a letter between the 2 current freeholders saying they're happy for us to extend the leasehold with no extra fees?aside from legal fees and cost.

Or if they serve the notice then does that mean we cna just add 90 years to the 89 free or charge? And they can't object to that?

Thanks again. Will check out the leasehold advisory service first thing. Xx

You won't know what to expect until you know what the other freeholder is like. You can speak to the seller but they may not be honest if they want shot of the flat.

Your best bet is to offer with a clause that you want an extended lease.

The other freeholder will have a legal right to half of the lease extension fee (if you are going down the statutory lease extension route there is a strict calculation for this). They may be lovely and know its a quid pro quo thing and that when they need an extension you will do the same for them. Or they could be an arsehole and demand their half of the fee.

I would be weary of the seller going for an informal lease extension as they could up your ground rent charges by going down this route. A statutory extension will make your ground rent zero.

Most joint freeholders will forgo the service charges as its just paying each other, but if the informal lease extension gives them a much bigger ground rent then the other freeholder may want to collect from you as a way of getting more money.

Also look carefully at maintenance on the building. When the set up is 2 flats they tend to skimp on maintenance and like any building maintenance to the roof, gutters, grounds etc.... will need to be done.

I can't work out how to quote someone but OhhhhhBiscuits is right - it's 80 years not 70 as per my pp where marriage value comes into play, sorry.

No not just a letter. There are 2 ways to extend a lease:

1. Informally - doesn't matter how long you've owned it and terms are agreed directly between the parties. The lease extension is drawn up and signed.

1. Statutory extension - includes the service of legal notices for terms to be agreed between the landlord and tenant. The relevant Tribunal can get involved after a certain time period has passed if a party is being unreasonable to set terms. Once terms are agreed, the extension deed is again drawn up and signed. The statutory entitlement is to a 90 year extension.

There are eligibility criteria for the statutory route, one of which is you need to have been the leasehold owner for 2 years. There is however a loophole whereby the outgoing qualifying tenant can serve the initial notice then assign the benefit of it on sale to the buyer who can then complete the process.

Informal is less of a headache usually (as long as the landlord is reasonable) and cheaper in terms of legal fees (normally).

This isn't unusual and your solicitor should know the process and be advising you of it, especially if you ask. The Leasehold Advisory Service website is golden though. When you look tomorrow check the other eligibility criteria to make sure they're met in your circumstances too.

In all honesty, the vast majority of landlords in tenant owned freeholds are reasonable so I wouldnt panic too much unless you've been given a reason to? It depends if you're in a rush to complete on the purchase though - if you are, the assigned benefit of the notice might be quicker.

Your responsibilities re costs will be higher than £500 though once legal fees are taken into account.

Thank you so much. Really appreciate it! We might go and knock on and try and chat to the other freeholder and see what they are like to get a sense.

Thank you. Really helpful. Appreciate it so much.