[curiousgeorge]

I'm buying a two bedroom flat in north London and there are just under 70 years left on the lease. I'm considering extending the lease by 90 years for £8,000 plus about £1,400 total fees.

I really don't know if I should bother with it, will it increase the value of the property by more than the amount I'm paying? I may sell in a few years and I'm wondering if a lease of 65 or so years will put off future buyers?

Any advice would be appreciated.

Thanks,
George

[Richard Webster]

I am writing as a Conveyancing Solicitor ( http://www.rwco.co.uk ).

Firstly, you will not have the RIGHT to buy a lease extension until you have owned the flat for 2 years - so although you have been quoted terms it may be that the freeholder was only saying that those were the terms for the seller given that he has presumably owned the flat at least 2 years and would have a right to an extension. Obviously a decent freeholder will stick to the terms he has quoted, but others might increase the figure for you because otherwise you would have to wait 2 years, by which time it will probably be substantially more as the lease has got shorter and possibly prices generally have risen.

When you come to sell it is much more likely that buyers will want you to arrange the lease extension and this could be very costly.

Although you have a right to an extension once you have owned the flat for 2 years, enforcing that right is another matter. You have to go through a procedure which eventually ends with the Leasehold Valuation Tribunal setting a price but the freeholder can delay and prevcaricate along the way so the whole porcess could take a year or two and cost a few thousand pounds. Freeholders know this, so typically ask for more than the extension is really worth because they suspect you are desperate to sell the flat.

If you can afford it you would be more secure to pay a little more for the flat and get your seller to organise the lease extension so it takes place "back to back" with your purchase - he uses the money from you to pay the freeholder and then passes on the newly extended lease to you - all this can be put in the contract. the seller then will be taking some risks (e.g. the freeholder's costs if you don't go ahead) but you don't then have the risks of getting rid of the property later.

Hope this is some help. I assume you already have a solicitor, but if you haven't you could go to my website and request an estimate!


Richard Webster.

[curiousgeorge]

Thanks for your reply.

I heard about the two year rule and I spoke to the agents managing the lease and they said the solicitors were prepared to allow me to extend anyway.

My conveyancer has quoted me for dealing with the extension (he says it's cheaper if he does it as part of the purchase) but at £475+ VAT it still seems rather high.

Thanks,
George

[Heidi]

Richard,

Have you ever come across a lease extension costing £35,500. This is the price I have (perhaps mistakenly) agreed to pay. The lease is currently 40 years.

Heidi

Originally Posted by Richard Webster

I am writing as a Conveyancing Solicitor ( http://www.rwco.co.uk ).

Firstly, you will not have the RIGHT to buy a lease extension until you have owned the flat for 2 years - so although you have been quoted terms it may be that the freeholder was only saying that those were the terms for the seller given that he has presumably owned the flat at least 2 years and would have a right to an extension. Obviously a decent freeholder will stick to the terms he has quoted, but others might increase the figure for you because otherwise you would have to wait 2 years, by which time it will probably be substantially more as the lease has got shorter and possibly prices generally have risen.

When you come to sell it is much more likely that buyers will want you to arrange the lease extension and this could be very costly.

Although you have a right to an extension once you have owned the flat for 2 years, enforcing that right is another matter. You have to go through a procedure which eventually ends with the Leasehold Valuation Tribunal setting a price but the freeholder can delay and prevcaricate along the way so the whole porcess could take a year or two and cost a few thousand pounds. Freeholders know this, so typically ask for more than the extension is really worth because they suspect you are desperate to sell the flat.

If you can afford it you would be more secure to pay a little more for the flat and get your seller to organise the lease extension so it takes place "back to back" with your purchase - he uses the money from you to pay the freeholder and then passes on the newly extended lease to you - all this can be put in the contract. the seller then will be taking some risks (e.g. the freeholder's costs if you don't go ahead) but you don't then have the risks of getting rid of the property later.

Hope this is some help. I assume you already have a solicitor, but if you haven't you could go to my website and request an estimate!


Richard Webster.

[Richard Webster]

For a lease with only 40 years left I'm not completely surprised. Whether the figure is reasonable will depend upon a number of factors such as the present market value of similar properties with longer leases and what you could sell your present lease for. I am a solicitor so I can't give advice on the amounts.

Given the figures involved I think you would be wise to get advice from a surveyor specialising in this kind of thing. There is a list at http://www.lease-advice.org/surframe.htm
You could well find it would cost £500-£1,000 pluis vat for a valuation but at least then you would know whether the figures quoted are realistic.

The biggest problem is establishing what the real market value of the flat is at the moment and what it would be with a longer lease. A freeholder will make some assumptions about the kind of discount that there would be on the price to reflect the lease length - your problem here is that unless you sold it at auction to someone who didn't understand what they were buying,
a potential cash buyer would immediately discount the price by the amount the landlord said he wanted for the extension and then take a bit more off! The calculation of the figure then becomes circular because the freeholder might try to justify his figure (if he knew you had such a buyer) by using the offer as evidence to support his own figures!!!!

[rajeevanand]

Hi there

I'm about to buy a ground floor maisonette turned into a flat in Reading. the lease left on the property is 62 years. Offer put on the property is 144,000 as the agent said that the short lease is taken into account.

The freeholder has quoted 7,500 + "reasonable" legal costs for extension. For this, the current owner will have to surrender the lease and the new lease will be for 120 years. The ground rent is also being increased from £20 to £100 per year.

Is that reasonable?

Any inputs will be truly appreciated, as I'm considering closing the deal in the next 2 weeks or so.

Many thanks

Raj

[grimo2002]

I am currently in the process of buying a flat with only 74 years left on the lease. The seller was supposed to start the extension process but has now backed out saying it will be too time consuming. Do they have to finish the process or just get it started? Will it take a long time?

[rajeevanand]

Apparently the process takes about 6 months to complete from what I heard from friends' experiences.

But, the seller can serve what's called as Tenant's notice to the landlord and you can ahead with the purchase. When the lease comes thru, the seller will have to transfer it over to you.

If you go ahead without the lease extension being applied for, you will have to own the property for atleast 2 years before you can ask for extension.

This is what I have learnt so far. You might want to authenticate this with a solicitor.

[andyls]

Originally Posted by grimo2002

I am currently in the process of buying a flat with only 74 years left on the lease. The seller was supposed to start the extension process but has now backed out saying it will be too time consuming. Do they have to finish the process or just get it started? Will it take a long time?

You really do want to negotiate with the vendor to continue with the process. But you cannot compel them.

Reason being, it will probably be cheaper to extend now than in 2 years time. The two years is a reference to the requirement for ownership before which you have the legal right to compel the freeholder to let you have a plus 90 year extension and the ground rent must go to zero. And the cost of the extension is based on the unexpired term of the lease. Shorter the lease, the more you will pay to extend.

I strongly suggest you get the vendor to simply serve the appropriate notice as a condition of your purchase. This will cost the vendor next to nothing and then they can assign that notice to you at the point of selling the flat. Your solicitor should be able to give you more detailed advice on this.

Alternatively you might simply want to buy the whole freehold of the block in conjunction with your neighbours. You could start this process from day 1 of ownership of the flats. If you want more information just post a message via our web site.

[Richard Webster]

As a Conveyancing Solicitor http://www.rwco.co.uk I'd say, with lease extensions, it is all very well getting the seller to serve the notice and then take an assignment of it - that gives you the right to pursue the statutory process, but that in itself can be time consuming and costly and you do not really know what the result will be.

Grimo says that the seller was going to start the extension process but has backed out. That suggests that he has caught wind of the landlord not wanting to say anything without the statutory process being started or wanting a lot of money upfront for his surveyor's fees to advise him about a figure to ask for. The very fact that you are likely to have to push through the statutory process is bad news. Why won't the landlord come up with a figure without all that hassle? If he won't then you have a right to be suspicious.

The seller's solicitor may know of the landlord and have advised his client to steer well clear of asking the landlord too much. Some landlords will be known locally for their general unreasonableness, and it might even be that the seller or his solicitor has a pretty good idea that if a figure is quoted at all, it will be an unreasonably high one that could put off a buyer!

If the Landlord is not prepared to do anything unless the statutory procedure is invoked then it is much more uncertain what the cost will be and that uncertainty should be reflected in the price you pay the seller for the flat.

The best position is for the seller to deliver the lease extension to you either as part of the price or where you pay extra to include the extension which the seller organises with the Landlord to complete back to back with your purchase.

If the landlord won't co-operate or is suggesting a very high figure then that in itself should be a factor in the price negotiation. You really need another flat nearby that deosn't have these problems that you can tell the seller you will buy instead of his unless he sorts it out or reduces the price. Depending on market conditions there may not be such a flat, but I would say you need to think very seriously about buying when you don't know what extra cost you are letting yourself in for.