Short leases: a concern or not?

[Abeona]

I have an older relative who is planning to downsize and has discovered that there are apparent bargains to be had in a local and very convenient marina development. Lots of investors bought them up as new builds 20 or 30 years ago and are now leaving the BTL market. Because there are so many coming onto the market the prices are lower than they have been for the last decade.

But they all have shortish leases — by which I mean 105 years at best, 81 at worst. At a previous property I was required by the buyer to extend my lease (fortunately share of freehold, so not prohibitive) because it was down to 102 years. Have attitudes changed? Will she find it very difficult to sell it in 10 or 20 years' time? Are people expecting leasehold to be abolished or changed to make it less expensive to extend?

My relative has blithely said that if she needs to go into a care home later in life she can just sell the place. She's also talked about it being a nice little nest egg for her son when she goes. I'm suspicious that this bargain might turn out to be a real loser. This would be her first leasehold property and I'm not sure she actually understands the system.

Your thoughts? Worth taking a risk on at her time of life?

105 years sounds fine to me, they're only a problem below 80 years my broker said

It'll probably be fine for her, but will be an admin problem for her son, and any lease less than 80 years will reduce the value. Anything less than 100 will ring alarm bells to buyers.

I'm a leasolder with 87 years remaining, and am extending the lease this very moment.

100+ years fine.

c80 years and lenders get twitchy. Marriage value kicks in and you need to pay to extend the lease - and the value of the property decreases as the lease reduces in length.

If you're looking at buying one with an 80 year lease, you could insist that the owner starts the extension process and pays the marriage value as part of the sale / reduce the price accordingly.

I need to renew mine in the next five or so years, have been advised to wait by solicitor as this bill will likely affect the cost of lease extensions:
https://bills.parliament.uk/bills/3523

Thanks very much for this. I thought there was legislation being discussed that should make it cheaper to extend a lease but couldn't actually find it.

Looking through the properties listed for sale, there's clearly one development where leases are down to 81 years (presumably started at 99 years from new) and people are trying to sell now while they can. I can see 13 flats in a single development of 40-ish all up for sale. Several have clearly had recent bathrooms and kitchens. I guess the rise in BTL costs has made them unattractive. Perhaps my cousin could be onto a good thing.

I'm against leasehold, it's not only the lease it's the service charge, these can be eye watering so definitely check what it is at the moment. Service charges can go up and your relative could get stuck with expensive repairs to pay for. Also check if any cladding is on the building, join National Leasehold campaign if you want evidence of what can go drastically wrong with leasehold properties.

Recently bought flat + was advised to only go for 100+ (lenders might accept 80+ but you want to be able to sell). So, I think as long as it's 100+ should be ok, depends how long planning to own before selling. If a long time, it could be a problem when comes to selling but then again, more worth the money of extending the lease.

If it's over 82 years then grab it. You can't renew the lease for 2 years and you don't want it dropping under 80 or it's bank breakingly expensive to renew.

She's also talked about it being a nice little nest egg for her son when she goes

So if she really cares about not leaving him with a massive headache, she should think carefully about what kind of lease she agrees to now. Or, she can absorb the costs to extend it to 999 years so he's not stuck with an unsellable property.

Re: leasehold reform. Who knows? I think there's a possibility there might eventually be a blanket ban on them for future properties or they'll be at worst peppercorn, but I doubt a ban will be applied retrospectively, due to the tens of billions of pounds tied up in the - well - leasehold scam. Even pension funds invest in them. It's a very messy problem to unpick for any government.

Sorry for the Sky link, I'm a bit short on time today:

https://news.sky.com/story/pension-funds-brace-for-30bn-hit-from-gove-leasehold-reforms-13118737

Lease length aside. I'd be very suspicious with that number of properties up for sale at once.

It could be mortgage rates on BTL, or not. What are the service charges? How have they been escalating? Any other proposed developments near by? And so on...

It's probably the roof

She could always buy one with a lease well into the 80s or above and then extend the lease in a couple of years if the legislation hasn’t changed the situation by then.

"I guess the rise in BTL costs has made them unattractive. Perhaps my cousin could be onto a good thing."

I would be concerned if 13 out of 40 flats were for sale, very concerned. I would advise her to look at the details of owners who are selling (Dont waste energy asking the agents - its cheap and easy to get deed details from land registry online). If all 13 are actually owned by one or two investors then that's probably no problem - as it is likley just to be one or two leveraged debt monkeys being forced to sell up by normalised borrowing costs. If this is the case she could negotiate hard and get a good bargain.
If on the other hand there are 10 different owners then there is likley a problem with that development not yet evident to the average buyer.

30% of the apartments are for sale? That sounds alarming. Ask for all the paperwork from the management company.
I would suspect, that the building has had very little maintenance done/needed since it was built, and that is about to change.
With 13 on offer, at least the agents can’t try ‘We’ve had a lot on interest in this one, you need to move quickly to secure it’.
Definitely loiter and talk to the residents.

OP, I just dug this out of my inbox:

https://www.mortgagestrategy.co.uk/news/leasehold-homes-rise-12-to-4-8-million-in-england-dluhc/?eea=EEA&eea=b0RaaVd0T0c5bTlUNzN5b2VtRHFXcWp2cFBmc0RXTVVwQXBhbE1GbzFSYz0%3D&utm_source=acs&utm_medium=email&utm_campaign=INDIGO_MOST_EDI_ALL_Daily_090524%20&deliveryName=DM235415

There are now an horrific number of leasehold homes.

I concur with the PP; the numbers selling in the marina is a huge red flag.

My first step would be to ask the estate agent to put in writing the costs of:

Ground rent
Maintenance

Each year for 2019, 2020, 21 etc up until this year's costs.

If nothing looks wrong there, find out what the mooring costs have been in the marina for all those years too. It could be they are mostly boat owners whose mooring costs have gone sky high, so now there's no point owning a home there.

(I would love an update!)

'If it seems to good to be true, it usually is'

I've found this to be true time and time and time against whilst house hunting.