Lease extensions

[CellophaneFlower]

My son is currently looking for a flat. There are a few around with shorter leases, around 86 years.

I know the basics, such as once it falls below 80 years it's unmortgageable and the property needs to be owned for 2 years before an extension can be applied for etc. Just have some questions if anyone can help please?

Is it still dangerous territory buying a flat like this? Are there any reasons an extension can be refused? If not, I'm puzzled as to why these flats tend to sell below market value and the current owner doesn't just extend prior to marketing?

Thanks!

You could get an informal lease extension before 2 years but you may pay more for it. After 2 years you can do a statutory lease extension which has a defined calculation for the price of the extension.

You could ask the current leaseholder to start the process of a statutory lease extension for you and then you won't have to wait 2 years.

The current owner may not have the cash up front to pay for the lease extension so that's why they haven't done it.

I'd definitely ask the current owner to start the process- your ds may have to pay the surveyor and lawyer costs though. It's still mortgageable

Thank you. So there's no risk involved? The extension couldn't be refused?

Thanks, I didn't actually know about this till you both mentioned it. So the process gets started and he pays for it once he's the owner?

I'd be cautious personally - I extended mine on my flat via the statutory route after living there many yrs and wld've struggled to sell it without extending beforehand. When I purchased I had no idea of the complexities of leasehold property.
Even though there's protection this way you are still at open to the whims of the kind of freeholder you have. So if you buy & try to extend before the 1st 2 years your freeholder could very easily see this as an opportunity to make a quick buck & screw you on the cost. Not sure how many sellers wld be willing to start the process for you - it would have to be reflected in the cost of the property but then they may not be able to sell unless they do so it may be straightforward. There are also freeholders that are very difficult to locate so that even though they're served a statutory notice they are a distant investor or family member living in a different country &/or hidden behind other companies. Leasehold property is a nightmare IMO & needs serious reform.

In our case the freeholder was 'absent' i.e. there was on old record of who they were but the company had dissolved I think and we couldn't track down a person. This would have made extending even more complex. We just got very lucky and managed to sell to some first time buyers even with only 84 years left.

The law recently changed the 2 year rule doesn't exist anymore, it can be done from
day dot!

however, it's expensive for 90 years and under

Do not buy!! Unless the current owner agrees to extend it before you purchase it. I wouldnt buy anything with less than 120 years on it. It can be difficult to get a mortgage and leaseholds are so complicated and come with many extra costs. I'm currently a leaseholder and have been through both a sale and a purchase of leasehold properties.

I've had to extend the lease on an inherited property as just couldn't sell it without. Yes there is a calculator but the freeholder can still negotiate and have you over a barrel. It cost me nearly double what the extension calculator suggested.
I'd avoid leasehold if you possibly can. It's a terrible system

I’m in the process of extending mine with Southwark Council, and, they are unbelievably slow. If it’s ex-LA, be prepared for things to move at a snail pace—it’s like they’re in no rush at all!

Thanks all. I'm not sure he can really avoid leasehold as can only afford a flat and share of freehold are few and far between.

Interesting to read the calculators aren't accurate as I didn't realise the leaseholder could just charge what they like? Will definitely investigate further.

We extended our lease as it had fallen below 80 years - as we could not sell it - cost us £70,000! Sickening!

Christ! Did you try to extend before the 80 years?

You've had to pay the marriage value premium I'm guessing. This is another thing I'm pondering. If the freeholder knows they can get more money from that when the lease falls below the 80 years... can they drag it out in order to achieve this?

I know this is supposed to be scrapped and the reform act has been passed but no changes have really been made yet have they 🙄

The freeholder can't charge whatever they like. However the law has changed more favourably for leaseholders. Get in touch with the leaseholder advisory service.

I imagine EA’s are v cavalier too about just getting a lease extension as of its as simple as buying insurance or something. Mine was drawn out, costly & stressful too. Never again!

He’s probably not going to find it easy to get a mortgage on something with only 80 something years on the lease and by the time he owned it and could extend it, it could be expensive.
I bought something where the seller extended the lease as part of the sale, It was 60 something years while marketed and it was around £80k for it to be extended.

With only 6 years max until the 80 year date, your son needs to factor in that he will most likely need to pay for the lease extension ant some point, and run the figures.
Most vendors have done the maths and prefer to sell at a small discount which does not reflect the true costs involved.

When my brother & I were trying to selling our late father's flat with a shortish lease 2 estate agents advised us not to extend but to sell with the shortish lease and any buyers could use this point to negotiate the price as we would not get back what it would have cost us to extend (over £20,000).
In the end we rented the flat out and then the freeholder wanted to sell, so we have a part share of the freehold and a 999 year lease. So this should put us in a better position when we do decide to sell

I think over 80 years is generally fine for a mortgage and once it drops below 80, that's when the marriage value kicks in and you have to pay an extra percentage of the properties value, worked out from what it would be worth with a full lease.

This is what they're trying to scrap... but it hasn't happened yet.

The online calculators are showing it to be quite a reasonable amount... but I have no idea if these are accurate 🤷‍♀️.