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My mother in law is looking to buy a flat leasehold. I've no experience of this, so just doing some research.
Apparently there's 70 years left on the lease. Someone has told her it should be at least 99 years? Also any real world guidance on things to look out for, pitfalls etc. And surveys? I guess usual rules apply and get full structural survey but would this be for the whole building? It's 3 storeys and has about 20 flats so not sure how that would work.
Any pointers appreciated!
She might struggle to get a mortgage on such a short lease. They tend to expect at least forty years remaining after the end of the mortgage.
No mortgage- she's been in council all her life but has inherited a bit so just enough to get to a nicer area
Quite a good guide here...
https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/
They also have a guide on how much it will cost to extend the lease - which if she's planning on leaving an inheritance for somebody might be an issue.
Cheers Jim 😁
I think she'd have to live there three years to be allowed to extend the lease herself, for this reason it's quite common to negotiate with the seller to get it done first. Hopefully with a building that size the actual management of the place is reasonably straightforward, it was painful when I lived in a block of five because we could never get enough of the leaseholders in agreement and funds at the same time to make much happen.
She could just live there and run down the lease herself, but it will get progressively more expensive to extend and harder to sell on later.
this lot (Lease Advice) will tell you even more. Government run, and great help 15 years ago when we needed some, er, advice.
Buying anything leasehold with a term of below 80 years will cause problems because the marriage value on a lease extension will be quite substantial.
If she is happy to just run down the lease, doesn't need a mortgage and doesn't care about selling it then it doesn't matter. However that would close down all her options so I'd say get the current owner to extend the lease or walk away.
There are other important issues with leasehold, such as who owns the freehold and who does the management and who sets the maintenance fees. Also whether major works are paid for out of the maintenance fees or are an extra charge. In other words when it is decided that a new roof is needed or the whole building needs repainting will each leaseholder get a massive bill.
Her solicitor will ask all these questions but some people take no notice of the answers.
Also find out what state the accounts are like. What work has been done / what needs to be done - whether any reserves have been built up for pending work (for example, where I live there were 5 flats that had to get their roof sorted - the cost was £25k, so each flat had to stump up £5k).
What is included in the service charge (buildings insurance, painting, grounds maintenance, hallway cleaning, etc).
Possibly an important question - what have the maintenance costs been like for (say) the last 5 years? It might be very stable and no surprises, or they could be ramping up to cover things that have been ignored over time.
I think she only needs to have owned the flat for three years to force a lease extension. There's nothing stopping her negotiating with the freeholder on day one, or indeed before purchase, to see if they're receptive to an extension.
We’ve started investigating this ourselves as there is currently 82 years left on our flat lease & we don’t want to incur the extra costs of extending after it drops below 80.
Our leaseholder asked for £150 to cover their costs & are preparing us a choice of lease/service charge options for a 90 year extension from peppercorn service charge upwards with corresponding lease cost.
I wasn't properly paying attention as it's not a subject relevant to me but R4 (PM maybe, or might have been you and yours or Moneybox) did an article recently where the words that stood out were that Leasehold could be the construction Industry's PPI in years to come, and people should try to convert (or force new developments) into 'Commonhold'
But I guess the advisory groups above will know about this anyway.
https://www.bbc.co.uk/news/uk-46508795
Leasehold could be the construction Industry’s PPI in years to come
This is a recent thing where the developers have written new rising charge lease agreements. I don't believe that any of the major house builders are doing this any more and certainly most of the ones that we deal with have stopped doing it, and/ or have made arrangements to remove the charge form previously sold homes.
For note - I live in a leasehold flat which had dropped about 4 years below 80, and it was quite a painful and expensive process to extend the lease by 99 years.