First Time Buyer/Shared Ownership - Lease questions - HELP!!! 81 YEARS REMAINING

[harec]

Hi All,

I'm currently looking at my first flat purchase; 55% shared ownership and really need some advice.

The current lease started October 1992 with 99 years and is currently 81 years until October 2011.

I have looked into lots of different info but my main concern is that if I was to buy the flat (55%) then I will not be able to apply to a new lease for 2 years by which time 'marriage value' will have to be taken into account increasing the cost of lengthening the lease to me.

The current tenants will not extend the lease even though they are in the best position to. If I was to stay in the property for 3 years then I think I could have a big issue with the resale.

Any help or ideas would be much appreciated; i'm really keen on this flat and it would be perfect for me but i'm not stupid and realsie I may to let it go.

Thanks
Chris

[sgclacy]

You need to advise as to the ground rent, its review pattern and the value of the flat and whereabouts approx it is.

[harec]

Hi, flat is worth £145.000
55% ownership - £79,750

Located in EN6 (Potters Bar)

Rent is £140 per month (approx) - Shared ownership

Thanks
Chris

[harec]

I have now been told that you cannot apply to extend the lease on shared ownership unless you purchase the entire 100% of the property.

In that case how would the lease ever get extended? Surely at some point it would need to be extended to ensure that:

a) It covers any new buyer to ensure that the mortgage companies will lend on the property

b) It covers the tenant so that they are not stuck in a property that they cannot sell (due to no-one being able to get a mortgage)

[leaseholdanswers]

I have now been told that you cannot apply to extend the lease on shared ownership unless you purchase the entire 100% of the property.

In that case how would the lease ever get extended? Surely at some point it would need to be extended to ensure that:

a) It covers any new buyer to ensure that the mortgage companies will lend on the property

b) It covers the tenant so that they are not stuck in a property that they cannot sell (due to no-one being able to get a mortgage)

No because you are buying a wasting asset. The price is merely a capitalised rent. You will have repaid the mortgage long before the 81 years and the price you pay today is the right to live there for 81 years.

You can of course have your solicitor approach the landlord and request an extension; they will often appreciate the cash!

[harec]

But will this cause me issues with re-sale in 3 years time? Won't the new buyer be asking exactly the same questions?

What you are saying is that the lease should not be an issue in any case with shared ownership unless you are looking at staying for the entirety of the lease length?

[jeffrey]

I have now been told that you cannot apply to extend the lease on shared ownership unless you purchase the entire 100% of the property.

Yes. You can buy-up the remaining share ('staircase') and acquire the long leasehold.
If your L owns the freehold reversion, a long-lease extension can be completed at the same time.

[harec]

Thanks for your replies, the thing is I’m not too bothered about buying the flat out right, I see it more as a stepping stone for the next 3 years.

My main concern is still the issue that if I was to sell my 55% share with 77- 78 years remaining (in 3-4 years) then I may have issues with prospective buyers asking exactly the same questions that I am.

At some point the only way to extend the lease will be for someone to buy 100% of the property which as the length of the lease reduces will become a larger concern to the prospective buyers, at some point the plus side to the shared ownership will become a massive downside.

[leaseholdanswers]

At some point the only way to extend the lease will be for someone to buy 100% of the property which as the length of the lease reduces will become a larger concern to the prospective buyers, at some point the plus side to the shared ownership will become a massive downside.

At this point in time it is, as shared ownership leases from non private landlords cannot be compared with the majority of leasehold properties when the value of the leasehold interest starts to decline..

You are at the time where they are diverging as comparible investments, but are functioning as was intended. You pay x today and sell in three years for say 10% less , but the difference reflects your use and occupation. We all assumed property prices would just keep going up and any loss would be made up for in the underlying increase.

This was a known issue when these were being widely used in the last 10 to 15 years, but it secured votes and support from sectors of society at the time, neither were worried about 10 years later.

[harec]

So the lease extension question needs to be answered in a way as to explain that lease extension is not available to shared ownership but a reduction in price may be required to take into consideration the constant decline of the lease.

If flat prices were to rise in 3 years then in theory I could be no worse off but if they were to stay the same or fall then I may need to take less for the percentage of the property.

I was not aware that I could negotiate on the price of the 55%; I had been led to believe that this was currently a fixed price.

In theory just because the housing association values the property at £145,000 and the 55% share as £79,750, I could still offer less to the current owner for the 55%?

[leaseholdanswers]

So the lease extension question needs to be answered in a way as to explain that lease extension is not available to shared ownership but a reduction in price may be required to take into consideration the constant decline of the lease.

If flat prices were to rise in 3 years then in theory I could be no worse off but if they were to stay the same or fall then I may need to take less for the percentage of the property.

I was not aware that I could negotiate on the price of the 55%; I had been led to believe that this was currently a fixed price.

In theory just because the housing association values the property at £145,000 and the 55% share as £79,750, I could still offer less to the current owner for the 55%?

Or decide not to take it based on your valuer's advice. Of course if the HA is offering the lease and not the existing owner, ask them to extend it, and adjust the price or equity accordingly.

[harec]

So I can put it a lower offer for the 55% even though the flat has been valued at £145,000?

[jeffrey]

You can of course offer any amount you like, but L might not accept the offer!

[leaseholdanswers]

You can of course offer any amount you like, but L might not accept the offer!

I think this is case of the HA offering the flat take it or leave it.