Buying a flat with a short lease Post Reply

[CHT]

We've been offered the chance to buy the flat we're currently renting. We love living here, so we definitely would like to own it. Unfortunately it only has 74 years left on it's lease. We've been told by the estate agent to either make a high offer on condition that the current owner extends the lease; or a lower on the grounds that we will shortly need to pay for the extension (which will cost about £25k).

Does anyone have any experience to help us decide which path to take, or know of any good professionals who can give us proper advice?

Thanks!

[sparkletiger]

You definitely need to get legal advice. But having experienced forcing the sale of freehold of our last flat with the 2 other leasholders and now owning the freehold of our Vic conversion flat here's a few things to check

Does the owner who is proposing to sell you the flat own the freehold too? How many other leaseholders are there? Can a lease extension be included as part of the sale? If the freeholder doesn't want to extend the lease as part of he sale he/she may find it hard to sell to anyone as it can be difficult to get a mortgage for a property with too short a lease. We paid around £25k to buy the freehold with the 2 other leaseholders. It should've been less (this was about 6 yrs ago) but our solicitor mucked things up by taking to long. Long and Boring story.

Maybe start with mortgage broker:provider to see if an issue. I'd recommend being firm with the seller about the lease issue needing resolved. Good luck. You may like the place but be aware that even if you do get a mortgage if you don't get the lease issue resolved now youll pay for it later

[CHT]

Many thanks,sparkle tiger, good points. we're seeing the bank tomorrow, so it all depends on what they say....

[MrsAmanda]

I bought a flat 8 years ago with a relatively short lease - around the same duration as yours if I remember rightly.

This was a time when mortgages were handed out to anyone, but I had no problems mortgaging and bought it at considerable discount because of the short lease.

There were three other flats in the building and all of us clubbed together to buy the freehold. Cost about 8 grand each, I think. You need the majority of owners to agree to purchasing share of freehold, and I think, but don't quote me, that you have to have owned the property for two years or more. Now, I could well have got that completely wrong, it's just rung a very distant bell and I've not looked it up to find out.

[supergirl]

Hi
Having been in the same situation, i can confirm what thr previous poster said. You HAVE to be in the property for 2 yrs before you can either extend the lease or buy the freehold. So ehatever you do, you MUST ask the vendors to sign you via solicitors their right. It means that they are giving you their right to extend the lease or buy the freehold. This is the only legal way to contourn the fact that you have to be in a property for 2yrs. If you buy the freehold with other leaseholders in the property, you should set up a company together. The freeholder HAS to sell it to you at a "reasonable" price. If you think it is an unreasonnable price, there is a tribunal that sits a couple of time a yr and it usually agree with the people who wants to buy it. If you want to extend, it is exactly the same and you can also go to the tribunal.
Before miving to our house, we extended our lease from 75 to 199 yrs for £10k. The freeholder asked us £17k first but threaten to go to the tribunal so he saw reason (he is a v dishonnest man). It costed us about £1200 in sollicitor fees (because he sliwered fown the process as well).
Good luck. Sx

[CHT]

Thanks for all these useful points. Fingers crossed it all goes through OK now...!

[MrsOctober]

Pop along to The Bank, Northcote Road, tonight 6.30-8.30. There's a free legal seminar about buying leases and freeholds. It's by HPLP solicitors, a firm that I am currently using to extend the lease on a flat that I own and rent out. It's the last of three free seminars they're giving. Cynically, I imagine it is to drum up business, but they're leasehold specialists do it can't hurt to go. Good luck.

[BALLANTINE]

My partner is a professional associate of The Royal Institution of Chartered Surveyors and undertakes lease extension valuations in South West London.

He replies as follows:-

The previous posts are generally correct

You have a right to extend the lease under the Leasehold Reform Housing and Urban Development Act 1993. In order to qualify you must have held the lease for at least 2 years (you do not need to have lived there). If your seller is a qualifying leaseholder he/she can serve the notice of claim and assign it to you with the sale of the lease. The new lease will be for a term of an additional 90 years (ie 74 years unexpired plus 90 years = 164 years) at a peppercorn (effectively nil) ground rent. You will pay a premium and you wil be liable for the freeholders reasonable valuation costs and legal fees. If the former cannot be agreed there is a right of application to the Leasehold Valuation Tribunal who will determine the premium and costs.

You will need the advice of your solicitor and a valuer

You may also look at acquiring the freehold together with all or some of the other leaseholders - i.e. enfranchise under The Commonhold and Leasehold Reform Act 2002. However the right to enfranchise is more complicated and you need to have some if not all the other leaseholders on board and set up a company to hold and manage the freehold. My advice if you are buying - get the lease extension and look into the freehold purchase at a later date.

i hope this helps you and other readers

Charlie Edwards MRICS
020 7228 4116/07956 160094

[Liza-Jane Kelly]

Hi CHT,

It looks like you've already received some great advice. However, I asked our Head of Professional Services, Roger Doncom, to see if there's anything else to consider. He said the following:

"Both methods are employed – however, in the case of extending the lease prior to the sale, be careful that a Freeholder doesn’t take advantage of a 'need for speed' and ask for more than should be paid. This could ultimately delay or complicate the sale. For this reason, it is more normal for the seller to serve notice to extend between exchange and completion to ensure the sale isn’t held to ransom by an outside party. With this in mind, the purchaser needs a formal, professional valuation to establish the best price."

If you'd like any further advice, feel free to contact Roger - his details are on this link http://www.marshandparsons.co.uk/services/professional/

I hope the purchase goes smoothly.

Kind regards
Liza-Jane Kelly, Marsh & Parsons

[Russellhunt]

I do lease extensions for clients. You want to have a good idea of the cost of the lease extension before purchasing and also that the vendor gives you the right to extend upon exchange. You can have it calculated by a seperate company to give you a ballpark figure. Don't go with an estate agent 'guesstimate'. Lease extension costs vary according to the market, the location, type of landlord (private or company).
If you do buy the flat, one tip, you want to keep it looking its worst when the freeholder's surveyor comes round to value it. Any questions, drop me an email, details below.

Russell Hunt
Property Hunt
rhunt@property-hunt.co.uk

[CHT]

Many thanks for all these real helpful replies - I *love* that NVNers are so knowledgeable and happy to share.

The current plan is to buy the flat and get the right to extend the leasehold assigned to us, then look into the freehold issue later on. There are only two flats (we live in a converted house), so hopefully it would be relatively simple to set up and manage, but we need to be sure it is worth it financially.

Thanks again