Low lease

[BigWhiteRabbit]

Hi - can anyone tell me the risks of buying a property with a low lease? We are cash buyers, this property has 44 years left on the lease. It is, IMO being sold at a very favourable price despite the low lease. There may be an opportunity to buy share of freehold as other flats in the block are share of freehold. If this flat were to be sold with long lease and in good decorative order it would fetch £130 000 more. Others with low leases in the area are being advertised at a much higher price. It's an area with plenty of low rise blocks from 1960s/70s, all private ownership. Could anyone help explain to me the risks and implications of getting involved with a low lease? Many thanks

It’s the cost of renewing the lease or buying the freehold that is the biggest risk. I would be asking the seller to get a quote and start the process as you can’t do that until you have lived there for 2 years when the lease will be even lower. A lease this low will mean paying for marriage value which applies on anything under 80 years and increases significantly every year below that. A friend of mine recently extended a 55 year lease on a flat, it cost £45k and once extended the flat was worth £250k, it was unsellable beforehand.

There is a rough and ready calculator here, which can give you an estimate of what it will cost to extend the lease and restore the flat to normal "marketability".
https://www.lease-advice.org/calculator/

That might give you a better sense of whether the price being asked is actually favourable. If you will be taking on the hassle and unknowns of doing the extension after you buy (rather than the seller it doing it first) then you should expect a further significant discount to allow for that.

That website is quite useful generally.

A lot of the calculators don't cover mortgages below 80 years as marriage value is payable.

Connaughts does and suggests premium would be around 29k if FULL 44 years left and assuming zero ground rent. If there is ground rent it will be higher.

Plus you have to pay your own and the freeholders reasonable costs (solicitor and valuer) - roughly £5k in total I would suggest allowing.

Finally, you can't start the lease extension process until you have owned for 2 years (so would be 42 years left, with a higher premium if you wait until then).

However, the current leaseholder can give the statutory notice and assign to you to finish the process and pay etc.

The above all assumes you do intend to use the statutory route (we did).

'Leases below 80 years not mortgages

Thank you for the responses, very enlightening. How long can the process take? The property is not in a chain.