70 years lease remaining - purchase with or without lease extension?

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    70 years lease remaining - purchase with or without lease extension?

    I've bought property before, but never leasehold, so sorry in advance for my lack of knowledge.

    I'm looking to purchase a leasehold studio, its a bank repo and my offer of £97k has been accepted. The purchase is for buy-to-let purposes.

    The flat has a remaining term of 70 years, with ground rent of £100 pa. So I would be looking to negotiate a lease extension.

    Regarding a potential costs, [Question 1] am I right in thinking, the total cost could be around the £10k mark. Which includes marriage value, solicitors costs (both sides) etc. etc.

    I have looked at some online calculators but I'm not sure they include estimate all costs (e.g solicitor, valuation etc )

    [Question 2] As I'm buying as a buy-to-let I've read that I cannot ask for a lease extension until I hold the property for two years - is that right?

    Another studio has just come on the market in the same block, it's in slightly better condition and is being sold with a new lease extension, the price is £115k. [Question 3] Which would have the lowest total purchase costs? I think it will be the £115k

    Thanks in advance for your time,

    #2
    Just found sgclancy's thread http://www.landlordzone.co.uk/forums...-for-lease-ext, using this cost for the extension is £9k.

    I'm right that fees will be in top, so would I be looking at £1k for solicitor cots on each side, giving a total of £11k - or am I way out?

    Comment


      #3
      There is a way to not wait for 2 years before extending the lease. Get your vendor to serve notice (section 42) to the freeholder in between exchange and completion with a clause on the contract stating that the vendor will serve such notice prior to completion. The vendor, on completion, will assign the notice to you and you can then continue with the lease extension process straight away. The freeholder has 2 months to respond to the notice (section 45) from the date section 42 was issued.

      Ask your solicitor for advice, they will know all this. I bought a leasehold property with 73 years remaining and obtained a statutory lease extension less than 6 months after completion by going through the above described process.

      Comment


        #4
        Originally posted by bandontherun
        Id say you have answered you own question. By the time you have bought the lease extension there wont be much of a saving. 70 years is well short. You can always chip the price you've offered. The Bank wont much like it but they are the bigger idiots for lending on a shortish lease!

        You are correct in surmising that there is a two year qualifying period before which you cannot lodge a valid claim for a lease extension as of right. Whether you occupy it or let it has been irrelevant for some years.
        Thanks for the info. The short lease property is the repo being sold by a bank. The longer lease property is a private sale.

        My current thinking is the saving is negligible so I may go for the less hassle option and buy the more expensive property.

        Comment


          #5
          Originally posted by verylonglease View Post
          There is a way to not wait for 2 years before extending the lease. Get your vendor to serve notice (section 42) to the freeholder in between exchange and completion with a clause on the contract stating that the vendor will serve such notice prior to completion. The vendor, on completion, will assign the notice to you and you can then continue with the lease extension process straight away. The freeholder has 2 months to respond to the notice (section 45) from the date section 42 was issued.

          Ask your solicitor for advice, they will know all this. I bought a leasehold property with 73 years remaining and obtained a statutory lease extension less than 6 months after completion by going through the above described process.
          Out of interest would that increase the sale duration, as the low lease property is being sold by a bank I don't think they would go with it if it elongated the sale time.

          Comment


            #6
            Originally posted by Soled73 View Post
            Out of interest would that increase the sale duration, as the low lease property is being sold by a bank I don't think they would go with it if it elongated the sale time.
            No, your property purchase is independent from the lease extension. They are two separate transactions. You first buy the lease as it currently stands (70 years remaining) and extend once the property is yours. The property can be sublet (lease permitting) while you extend the lease. Again, these are independent. The only requirement is that the seller serves notice to the freeholder to extend the lease prior to you purchasing the property, otherwise you will have to wait for two years to extend. You will need to advise the seller how much you are willing to offer the freeholder for the lease extension to enable the seller to include your proposed premium in the notice. To decide how much you want to offer, you can appoint a surveyor (at the same time as the survey) to evaluate the premium to pay for the lease extension. Ultimately, you will end up paying for the lease extension, including the freeholder's solicitor fees.

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