Expiring Lease on House

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  • Expiring Lease on House

    I've learnt a lot from this forum, however a bit confused by one thing.

    I have an friend at the local pub in his 70's

    He has a house probably worth £230k (same street go for up to £280k but are in much better condition, his hasn't been modernised)
    Ground rent is £6.80 a year never been changed.


    He is a leaseholder bought the house in 1970 with 56 years unexpired
    It now has only around 13 years left unexpired
    He sent an informal letter asking to buy the freehold but the freeholder just said a simple no.

    He wants to both secure his place to live till he passes and hand down this to his children.

    The only 2 options I see for him are

    Buy the freehold through the legal route rough estimate has been around £100k (he doesnt have the money to do this he only has around £30k in saving, neither do his children).

    or extend the lease

    My main question is this
    With so few years unexpired, the freeholder is likely to say it will cost £90k - £100k to extend the lease

    There is a law I've seen on houses where you can force a new lease of 50 years on houses. (90 years on flats)
    And all he pays is his and the freeholders legal and admin fees.

    Why don't people go this route? I know a new lease is written up which starts after the old one expires and the ground rent will go up, but at least he secures his home to stay in till he dies then his children can try to negotiate with the landlord.
    What am I missing here?
    I'm thinking he secures his place to live his kids still inherit a house with a rubbish lease but at least they can get something for the house say try to sell it to a property developer for £100k it will still have say 40 years on new lease.
    The property developer who has money can then offer the freeholder £120k + the £100k to the kids he then does it up and sells it for £300k
    Again am I missing something?

  • #2
    What you are missing, as asked, is that whether a flat or a house, they have to pay a premium for that extra 50 years or 90 years.

    When he purchased in the 70's the problem with leasehold houses was already understood and the Leasehold Reform Act 1967 in place. The advice would have been given that it was a wasting asset and that the lease should and could be extended. it was likely cheap for a reason..............


    At the end of the lease there is no new lease. He is entitled to stay as an assured tenant at a Market rent not a ground rent, as if he was renting in the private sector albiet with greater security as as an assured tenant, not assured (shorthold).

    Why would a property developer buy it with a 40 year lease?! the owner might want to pay him to get it back early if there were development rights that he could exploit, which would increase the vlaue, if you can persuade him to sell. That at least gives a cash sum to acquire or rent something long term say shared ownership.

    Harsh it may seem but when he bought it it was what it was a short 56 years lease that would cost a lot to extend or there would be nothing for his family to inherit. Nowt to do with fairness it is wata it is and you make your choice....

    .
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


    • #3
      Ahhh I get it now thanks so much for your help.

      Ok will check, I did actually ask him this a while ago.
      How did you get a mortgage with a short lease?

      But he told me back in the 60s banks didn't talk about lease extensions much.

      Maybe I shouldn't believe what he says on this point.

      So I gather his options are?

      Stump up £100k buy the freehold
      Stump up £100k get a longer lease (Are these usually this sort of price, as in similar to the price of the freehold?

      Just forget it and stay as an assured teneant until death

      Comment


      • #4
        He needs to work out the financial implications of each option and then decide.

        The freeholder is not obliged to sell the freehold. He may grant a lease extension but that comes with a price. If your friend stays as a tenant after lease expiry, then he needs to compare the rental cost per month x 12 x the number of years he thinks he may live with the premium to pay up front to extend the lease. Better yet is to calculate how many years of rent will reach the level of the lease extension premium. If he stays as a "market" tenant, he needs to have written confirmation from the freeholder that he can do so.

        Comment


        • #5
          Well sort of in that I also suggested that if there is development value, then the freeholder might pay over and above the current value to get the house back 13 years early.
          Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

          Comment


          • #6
            Am going to advise him tomorrow.

            I know it's his fault but what a shame, he's paid £200k and paid his mortgage all done through his life now he owns nothing.

            Comment


            • #7
              Also here's where were at, you can agree or disagree.
              This guy paid all his life and got zero.
              I live in one of the most expensive parts of London.
              At my local pub they may put up the money for this guy to buy his freehold, there talking about it now.
              However what strikes me is they all say the same.
              They all earn well £500 to £700 a day
              They feel sorry for this guy and may bail him out but all say the same

              "Good luck with your future Britain, your finished, your crazy laws, where half the establisment own the land rights to everything.
              "Good luck, were out of here, we will take the £700 your paying me daily and leave when it ends, and it will end, all the capital flows are going to asia. You really think your homes worth a million good luck with that"

              Comment


              • #8
                Actually your friend bought the right to live in that house for 56 years, assuming he paid his mortgage off after 25 years, he has been able to live there for upto 31 years rent and mortgage free. Not such a bad deal in London, one of the most expensive cities in the world, where ironically property prices are pushed skywards, obviously there are better investments to be made as far as property goes, but he hasn't done so bad!

                As other posts mention there is still some potential value there.

                Comment


                • #9
                  I'm guessing there has been a bit of moderating going on here, sorry if I over stepped the mark.

                  Comment


                  • #10
                    Originally posted by faustocoppi View Post
                    "Good luck with your future Britain, your finished, your crazy laws, where half the establisment own the land rights to everything.
                    "Good luck, were out of here, we will take the £700 your paying me daily and leave when it ends, and it will end, all the capital flows are going to asia. You really think your homes worth a million good luck with that"

                    Pub logic, you have to love it. As always there is a germ of truth, which is topped with the logic- its always "them's" fault

                    Money goes where money grows it is and always will, and people follow it and seek it out.

                    The ownership of land has little to do with the establishment, unless you mean councils NHS government buildings etc, the bulk is in private ownership through you guessed it, from money holders, the lenders institutions and bond markets who make their money worldwide to lend mortgages and pay pensions.

                    And they made a mortgage available to your chum who had a choice to buy a wasting asset, or not.

                    You pays their( see above) money and takes your choice.

                    I just hope he realises that in a small way he could be a money man and get advice on potential development value of the house if there is any.
                    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                    Comment


                    • #11
                      Originally posted by faustocoppi View Post
                      Am going to advise him tomorrow.

                      I know it's his fault but what a shame, he's paid £200k and paid his mortgage all done through his life now he owns nothing.

                      This free guide on "leasehold houses" may help :

                      http://www.lease-advice.org/publicat...nt.asp?item=15

                      Comment


                      • #12
                        Originally posted by DNM2012 View Post
                        I'm guessing there has been a bit of moderating going on here, sorry if I over stepped the mark.
                        Your post #8 and the earlier post #7 contained statements that breached forum rules. Please refer to rules 1 and 18, Infractions number 8, and T&Cs number 3.

                        http://www.landlordzone.co.uk/forums...hp?do=vsarules

                        But let’s not get this out of proportion, I considered what was written to be a minor infringement and so simply decided to edit the posts, I did not consider that any warnings or infractions were warranted. However I do know that had I left those comments in place they would have led to further comments and complaints that would have been unhelpful and would have detracted from the issues raised in the thread.
                        I also post as Mars_Mug when not moderating

                        Comment


                        • #13
                          Not sure about forum rules, but thanks so much to everyone who helped, wasn't offended by anyone and hope I didn't offend anyone.

                          Slightly surprised by the fact that because he bought in 70 the 67 act doesn't apply.

                          Thanks for the advice on development

                          At the moment were only worried about securing a home for him to stay.
                          The guys at the pub look likely to raise 100k for him to buy the freehold so he can give it to his children when he passes away.

                          Comment


                          • #14
                            Originally posted by faustocoppi View Post
                            At the moment were only worried about securing a home for him to stay.
                            The guys at the pub look likely to raise 100k for him to buy the freehold so he can give it to his children when he passes away.
                            I am confused by this post. In 1970, the house he bought did not cost any where near 200K. I am guessing it costs in the low 10,000's.

                            He has a secure home - once the lease expires he has the right to stay on and pay rent so he won't be homeless.
                            I would assume he would be leaving the house to the guys in the pub who have put up the 100K as how else does he intend to pay them back? Why should the guys at the pub raise money so his children can inherit a house?

                            Comment


                            • #15
                              If the 100k is given it will be so that he can attempt to purchase the leasehold or purchase an extension on lease by say 90 years.

                              People in pup are pretty serious about just giving the money, the guy is pretty popular just bad with his money.

                              Pretty wealthy people in pub one of them at a guess has at least 5million at a guest just by his lifestyle.
                              Another is in a pretty similar position as he has a very large shareholding of a ftse listed company.

                              It won't be the first time they've done similar before.
                              There was a polish guy who was a barman but really skilled and quite good English they ended up paying around £12k for nothing in return.

                              I had a friend who ran a charity, I told of how I saw what she was doing, she was given a cheque for £4k

                              Generosity is out there, it's a very close little group who come from all walks of life.

                              They are still asking about the 1967 ruling though, although I'm sure whats been said is correct.

                              Comment

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