Flat lease terms – Help!

by Readers Question

9:52 AM, 1st August 2014
About 4 years ago

Flat lease terms – Help!

Make Text Bigger
Flat lease terms – Help!

Hi,

I’m about to step onto the BTL ladder and would like some advice… Flat lease terms - Help

I’m buying a 2 bed flat which was being sold with a 99yr lease. We have since been informed that the lease term is in fact only 64 yrs! The vendor initially said he couldn’t extend the lease due to not owning the flat for a minimum of 2yrs and agreed to drop the price by what he claims the cost would be to extend to 99yrs (£1750 inc Solictr’s fees). He now says he can renew the lease to 100 yrs after all.

My plan is to keep the flat for a maximum of 20yrs as a pension fund, then sell. This would then leave a term of 80yrs which after some research appears to be the cut off for lease renewal which I don’t want to get involved in!

The agreed price is £82000, with a ground rent of £900 pa.

My questions are:-

  1. In your opinion, is it a good idea to buy a flat with only 100yrs lease or should I be looking for a longer term?
  2. Looking at various leasehold calculators, the cost to extend seems to be more in the region of £15000 – £18000, not £1750! Can this be correct??
  3. Is there anyway I can find out myself, a) Who the leasehold company is. b) How much the cost of extending the term would be. c) Get a copy of the extension contract/invoice if the extension is completed.

I’m now doubtful as to the integrity of the vendor as he seems to change his mind a lot on a lot of things!

I have advised the estate agent that I would like a lease term of 120yrs minimum and am waiting for a reply….

Any advice anyone can offer would be great fully received as I’m now feeling a little unsure about the whole situation.

Many thanks and great website!

Damon.



Comments

Malcolm Hill

10:32 AM, 1st August 2014
About 4 years ago

I wouldn't worry as long as the lease is at least extended back to 100 years at his expense, I have recently bought several flats with leases of just over 90 years and will try to renew them at some time or sell on if the cost is too great. I once bought a flat in 1999 with only just over 60 years and kept pestering the freeholder and eventually got her down to a cost of £1750 to extend it back to 125 years as she had only £10 a year ground rent so it was worth her while to get a lump sum as she would have died before getting anything like the lump sum.
So also look at the ground rent as this could be a bargaining chip at a later date.

Jill Lucas

11:43 AM, 1st August 2014
About 4 years ago

That's quite a low cost for a lease extension. May be worth considering enfranchisement subject to complying with the criteria. With all the leasehold properties we buy we always go for enfranchisement or aim to buy the freehold worth investigating as very beneficial in the long term. Also RTM is the next step.
Enfranchisement is often way cheaper than a lease extension and provides major benefits - and you can then have a 999 year lease - buy you do need the other owners to be on side! Often a local solicitor who specialises in this will come and give an informal chat to residents on this.

LVW4

12:17 PM, 1st August 2014
About 4 years ago

Sounds very iffy! Also, ground rent seems rather high, and would play a significant part in the cost of buying the freehold. Is this particular flat worth all the uncertainty?

Mike W

12:21 PM, 1st August 2014
About 4 years ago

Contact the government run leasehold advisory service - I found them very helpful. They too have a calculator on cost on their website.

Yvette Newbury

13:54 PM, 1st August 2014
About 4 years ago

I was looking into this yesterday. Mike W is referring to: http://www.lease-advice.org/calculator/, was this the one you used, in which case yes it would be correct.

I agree with Lou Valdini, your ground rent is very high, this affects the price paid for the extension once it is below 80 years so don't be surprised if the vendor changes his mind about extending!

Once the extension is in place though, as long as you renew again prior to 80 years your extension would not be as expensive.

The present leaseholder may not be able to obtain a lease of 120 years; the extension may be set out in the Lease and only be for a set number of years and 100 years is perfectly acceptable.

Jill Lucas

15:24 PM, 1st August 2014
About 4 years ago

Wow the ground rent of £900 is very high! As a rough guide on lease extension costs you can pay up to 10k for a £100k plus flat, 15k for an up to £200k flat and £20k for an up to 300k flat. £1750 is low for a property worth £82,500 - I would guestimate around £7.5k to extend the lease - so if you can extend it for that good news. The lease may be revealing in terms of the ground rent and best to check it - as the figure of £900 may refer to the annual maintenance charge for the property which is about right! Your solicitor should be able to provide details of the freeholder unless he or she is absent!

I was a novice on enfranchisement and the acquisition of the freehold a few years ago and now have a few under my belt and would recommend this as a consideration. Especially as you can then get rid of the ground rent charge which is mega.

Get your solicitor to clarify the position and get a copy of the lease and read it line by line! so there are no hidden surprises.

Damon Wilkins

18:38 PM, 1st August 2014
About 4 years ago

Hi
Thanks for all the comments...just want to clarify the ground rent is £900 per year (£75 per month).
The lease advice calculator gives a cost of £7000 - £8000 (with 64yrs remaining) and £2000 (with 100yrs remaining).
So the vendor has either got it wrong or has got a good deal! I'll wait and see what happens, but think if he gets the extension I will probably go ahead as 100yrs seems a reasonable term and it is a really nice flat which needs nothing doing to it! If he won't or can't get the extension, then I will look elsewhere....

Thank you again for all your comments....

Damon

Joe Bloggs

12:34 PM, 2nd August 2014
About 4 years ago

extremely unlikely such an old lease would have a ground rent of £900! have you read the lease? must do this before doing anything else.

Damon Wilkins

12:58 PM, 2nd August 2014
About 4 years ago

Not had access to the leasehold, ground rent is £900 per year. Are you saying this is too much?

Joe Bloggs

13:16 PM, 2nd August 2014
About 4 years ago

you mean you have not seen the lease? if so therefore you are only relying on second hand info which may well be wrong! a lease granted in 1950 is most likely to have c.£50 - £100 GR. you need to check the lease before anything else.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

44% of landlords fear Right to Rent

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More