Lease length of 50 years - Leasehold is it worth to buy

[Metaphor]

Why is my son considering purchasing a maisonette that he likes, which has a lease length of 50 years and an annual service charge of £400? It fits our budget, but we're worried about whether it's wise to invest in a leasehold property with only 50 years remaining on the lease. Is it possible to extend the leasehold? I would appreciate your advice the pro and cons. Thanks

The Leasehold and Freehold Reform Bill currently going through Parliament will abolish the 2 year requirement and also make it cheaper to extend. It’s not law yet, but some people may take a gamble, wait for it to become law and then - hopefully - benefit from the higher protections it offers.

This is a bit misleading. Flat price 250k lease extension 875 k… last 3 bed price sold in that block 1250k. So still under market value. The lease extension is just a cost to take into account when buying. It will be set to an amount to make the flat at or below market rate. Ie probably not “affordable” to the OP. Someone will take it on who is willing to do the work. It will be a hassle but as in above quote you could save a bit on Market value if you do it right.

I sold my flat about 17 years ago and it needed a lease extension. It was about £8k and done as part of the sale if I remember rightly.

This .. " Two notable changes are as follows: (1) it removes the concept of marriage value, which should make it cheaper for some people with fewer than 80-years to extend their leases and (2) in some cases it caps ground rent at 0.1% of the value of the property when calculating the lease extension price."

So if you are mortgage free thus could be worth the gamble. The maths you need to do is whether the purchase price ÷ 50 years + ground rent < typical annual rent on a property like this. If so then you view this as renting a property with a gamble in being able to potentially buy it in the future (like a council flat for example )

Properties with such short leases are normally just for cash buyers as lenders won’t lend on such a short lease.

Could be an opportunity for a cash buyer but not for your son @Metaphor

As someone who previously purchased a leasehold property, I would steer well clear. It was our first home and we were a bit naive to what it entailed, and we didn't really encounter any issues but we could have.

Firstly it isn't advised to purchase a property with such a short lease, think once it gets to around 75 the owner should be looking to extend this, the less time it has on it the more it will cost to extend it. My friend recently extended hers from 70 years and it cost approx £22k so it is very expensive.

Alot of the leasehold companies seem to fall into administration which makes purchases and sales very iffy, this happened to us and took a few months to sort out before we could complete our purchase. This has also happened to some houses near where I now live and technically when the company went bust the land defaulted to the crown so it could be very interesting when any of those people decide they would like to move.....

Leases will also have restrictions and requirements and permission requests entailed, for example ours said we should redecorate every 2 years and ask permission to change anything like windows etc.

Check all paperwork very thoroughly, especially with regards to charges as these may be able to be reviewed and upped at certain intervals.

Basically I would just stay away from it, get a free hold. Yes it may be in budget, but it is in budget for a reason.... Too good to be true comes to mind.

As previous posters have said, you have to be in the property for two years before you can start the least extension process yourself. Whilst that doesn't sound very long, because the lease on the property you're considering is already so short, those two years could equate to an extra few thousand pounds when it comes to paying a conveyancer to look at an extension.

I sold my property a few years ago which had 84 years lease left. the buyer wanted me to start the least extension process to avoid the two year wait. I agreed to this so I got the ball rolling and the lease extension effectively happened just before the moving date. Buyer paid for the extension and obviously his solicitor fees. Annoyingly he bailed out of paying my solicitor fees for this just before the move so I lost about £3,000 pounds - in hindsight it should have been made clear from the very start that the buyer was liable for paying for everything.

These leaseholds should be banned.

I would also question such a low service charge. The charge should be set at an amount that enables a maintenance plan.

Don't.

The sellers should have extended the lease before putting it on the market.

Your son won't be able to get a mortgage on it.

What actually happens if you own a property and the lease runs out?

When you say maisonette, is it bricks and mortar or a mobile home? If it’s a mobile home it probably wouldn’t last any longer than that, regardless of the lease…..Approach with caution.

Not misleading at all. If someone is looking on the £300k region and has no concept of the costs of extending a lease, it's an excellent illustration of what the costs could be, showing it's not a massive bargain they might think it is.

You may pay less than market value in the end but when someone is only looking at the Rightmove price on the advert it doesn't mean they have any idea about the cost of a lease. So it remains very useful to show the prices when you're unfamiliar with the process.

@MumblesParty if the lease runs out then the flat reverts to being property of the freeholder.

I wouldn't touch a property with a 50 year lease with a barge pole.

It reverts back to the freeholder.

Don’t even consider buying until you have in writing how much it will cost to extend the lease and not from the estate agent!

If may only cost a couple thousand but I’ve heard figures of up to £40k

The property won’t be mortgageable so you’ll struggle to sell without extending the lease. I’m presuming you are cash buyers?

Google leasehold reform act. Under the act you can extend or buy the freehold at a reduced rate. Many freeholders won’t tell you this though.

also to consider is the service charge, what does it include? are there lifts, are they likely need to be replaced in a few years. Is it subject to RPI increase or just based on an annual budget?

Course you can, a freeholder can negotiate an extension with the leaseholder at any point they wish. However under the leasehold reform act you need to have owned the property 2 years to be able to make an application under the act

You could ask the current leaseholders (or their heirs if it is a probate estate) to put in the paperwork to the freeholder and then assign to you once a price for the lease extension has been agreed. You could save quite a lot of money compared to buying the same flat with a longer lease but, unless your son is a cash buyer, he will struggle to finance it until the lease has been extended.

+1

Service charges can go up.
And there will be joint repairs you'd have to chip in for. A new roof for instance.

Ok misleading is the wrong word. But anyone who thinks they can get a 3 bed flat anywhere in London for that price with no catch is out to get disappointed. They wouldn’t get further than a first chat with a solicitor before this came out even if it wasn’t highlighted in the particulars. What I meant is the example was put forward to highlight extortionate costs, when these costs merely brought the property in line with the market, a little bit under, even, to acknowledge that it’s a pain in the arse. The property in question isn’t unbuyable, but probably not the right one for someone who doesn’t know what they are doing / not willing to find out and jump through the necessary hoops.

When i purchased my maisonette it only had 75 years lease left - my mortgage company wouldn't approve the mortgage. We had to get the sellers to extend the leasehold

I work in conveyancing. Chances are it would be unmortgageable as most lenders require a lease length of mortgage term plus 30 years.

Yes leases can be extended but depending who the landlord is it can be VERY expensive

Conveyancer's fees don't change according to the lease term. The payment the Landlord requires may however change in that time frame