Worth buying flat with 15 years remaining?

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    Worth buying flat with 15 years remaining?

    Saw a flat in London for around 460k with 15 years remaining on lease.
    Central London, prime area.

    Would this property be unsavable in terms of lease extensions? How come people are wary to buy these?

    What would it cost?

    #2
    With 15 years lease remaining, the property is almost valued at nil.

    And no lender will give you a mortgage because the terms of a lease state that when the leased term ends, you give the property back to the freeholder, and you get no money for it.
    A lease is a long term rental in excess of 21 years.
    Is "almost" like leaseing a car for 12 months,- at the end of the term - you give it back ( am not talking about these weird leases that are to entice you to buy a brand new car, but renting a car- via a lease term.

    You can get a government statuary 90 year extension for a low price, -- look it up.
    But usually -the seller gets an extension for at least 125 years - even a 999 year lease extension before selling.

    Buying a 15 year left lease has to be pence in the pound price and 460k is not reflecting the 15 year lease

    Others should be along to tell you how to extend the lease before and after sale.

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      #3
      With such short lease, the flat basically worths 15 years of rent, less the service charges and ground rents!

      Comment


        #4
        If the lease was originally granted for more than 21 years then it is capable of being extended under the provisions of the 1993 Act

        A 15 year lease has its place in the market - if you were in your seventies it may be worthwhile as you can invest your capital elsewhere. If you can invest at high rates of return again it may be suitable. Also if you fear house prices may tank in prime central London it may be a cost effective way of having security of tenure and not seeing your capital erode.

        at the end of the lease you become a tenant of the landlord and then pay a market rent


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          #5
          If a 15 year lease ( you buy the lease- not the flat ) then it's a rip off, and current owners ar trying to cash in on the uninformed public, before the current owners lose all their money invested.

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            #6
            I think the estate agent is looking for a sucker. Maybe someone who does not read English too well, and does not realise about the short lease.

            (Who on earth would pay £30k a year in rent for a flat where you have to do all the repairs?)

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              #7
              It's quite normal for prime central london Duke of Westminster estate, nothing rip off about it just possibly the opportunity to live in a multi million pound property for the price of a 2 bed flat in Hackney. Lease can always be extended after 2 years if you want to stay longer !!

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                #8
                Extending the lease will cost lots of pounds because of the marriage value. I would definitely recommend u get a valuer to give u an idea of how much this might cost u. From there, u should be able to assess if buying the flat is a viable investment or not.

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                  #9
                  Originally posted by ram View Post
                  If a 15 year lease ( you buy the lease- not the flat ) then it's a rip off, and current owners ar trying to cash in on the uninformed public, before the current owners lose all their money invested.
                  What is being offered is an alternative proposition to owning a flat ordinarily worth I suspect about £1m . It is not as simple as it might at first seem

                  The type of buyer who will buy a 15-year lease for £460k will be most likely be represented by a solicitor familiar with a lease from the Great Estates in London and will know what they are taking on.

                  I suspect if the lease was extended to plus 100 years it would be worth around £1m - so two ways of looking at it :-

                  1) You buy for around £460k and spend around £500k extending the lease to get a property worth around £1m ( marriage value is very modest when the lease is down to 15 years)

                  or

                  2) You buy for around £460k enjoy the same standard of accommodation as the person in option 1 invest the £500k (which you would have spent extending the lease) so that in 15 years you may have (depending on how good at investment you are) more than what the flat would be worth in 15 years with long lease

                  If you want to live in a £1 million pound flat and think the market will fall, but want security of tenure for the next 15 years (which renting wont give) then option 2 may be worthwhile

                  Nobody is being ripped off PROVIDED that the terms and obligations on taking on such a lease are clearly understood before taking on the lease. I have made the same point about very high ground rents - there is no problem with them PROVIDED the value of the negative burden it places on the property is clearly understood and reflected in the price paid

                  The key for the legislators is to ensure that the information is presented in a form that a purchaser with professional representation can understand what the terms are



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                    #10
                    Maybe worth a punt that the government will abolish marriage value in the next 15 years?

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                      #11
                      Marriage value only exists because the yields used for the calculations is far too high. A lot has changed since the yield was set at default at 5% following an Appeal hearing in the case of Michelle Sportelli. What is quite likely is in a crowd pleaser the legislation is changed to abolish marriage value from the calculation BUT the interest rate used modernised to reflect that interest rates are far lower than seventeen years ago when Miss Sportelli claimed her rights under the 1993 Act so that in the end the amount payable to extend a lease doesn't fall by so very much. Costs however payable to the professionals will be likely to be drastically reduced, with the landlords being asked to swallow most of their own advisors fees.

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                        #12
                        Carcarot94. Come opp north, and you can have my ground floor flat, and includes basement and double garage.
                        Price to you £ 460,000 with 900 year lease, no repairs need doing because price includes full refurbish to your choice, New kitchen and bathroom, and everything repainted. Electric garage doors,

                        Although the current rate in this sought after "Avenue" is £ 160,000, but there will be no repairs needed doing to the flat, Refurbished to your tastes ( not too expensive though - no gold plated taps ) and 900 + year lease and between £500 and £1500 service charges depending on what needs maintenence.

                        It will save you spending a total of upto £ 1m.
                        I'll be in next week if you want to view, but only in for the asking price.

                        Or, a whole house in Detroit area I have for sale - currently tenanted - 3 Bedroom detached, 1939 vintage, completly remodeld, new roof, boiler, hot water tank storage, but no garage, but parking full length of propery one side for 4 cars.
                        Price only £ 60,000 with our without tenant.

                        I am not avertising on this site- ( U.S.A. houses are best advertised in the local area.) so just my thoughts via above on the stupid high prices for flats in London compared to what I have.

                        Comment


                          #13
                          Originally posted by JK0 View Post
                          Maybe worth a punt that the government will abolish marriage value in the next 15 years?
                          If the flat is worth around £1 m with a very long lease then at 15 yrs the marriage value is around £100k and the lessee currently pays £50k of that marriage

                          as Flying Freeholder states it may we’ll be that whilst marriage value may be abolished a lowering of the deferment rate from say 5% to 4% would compensate the freeholder for the loss in marriage value

                          it would be naive of the government to think that the Great estates in London will not run the legal argument over human rights and the value of the deferment rate all the way to the European court of human rights -

                          Comment


                            #14
                            Originally posted by flyingfreehold View Post
                            Marriage value only exists because the yields used for the calculations is far too high. A lot has changed since the yield was set at default at 5% following an Appeal hearing in the case of Michelle Sportelli. What is quite likely is in a crowd pleaser the legislation is changed to abolish marriage value from the calculation BUT the interest rate used modernised to reflect that interest rates are far lower than seventeen years ago when Miss Sportelli claimed her rights under the 1993 Act so that in the end the amount payable to extend a lease doesn't fall by so very much. Costs however payable to the professionals will be likely to be drastically reduced, with the landlords being asked to swallow most of their own advisors fees.
                            if marriage value goes and the deferment rate is lowered , then the calculation is easier - no agonising over graphs and talk of the no act world hedonic regression - such a move would be delivering a promise to make it easier and quicker and the cost savings will be a reduction in the professional fees payable to the landlord



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                              #15
                              Thanks all for replying. But if it costs around 250k to extend the lease, isn't it still worth it if the value overall is improved?

                              Say I have the money to extend the lease.

                              Comment

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