Sussex Lease Extensions Blog

Lease Extensions: Should I Buy a Flat with a Short Lease?

There’s so much to consider when buying property and top of the list of priorities when buying a flat should be the length of the unexpired lease term. Ideally it should be in excess of 85 years. As the lease shortens, future value and saleability will be affected – so the longer the unexpired term the better.

So should you buy a flat with a short lease?

Before buying any property with a short unexpired lease term take the time to calculate the likely cost of applying for a lease extension against the price of the property itself. The low price of a flat with a shorter lease doesn’t always balance out the cost of applying for a lease extension. The cost of fees for extending a lease should also be taken into consideration.

The price of extending a lease below 80 years increases considerably, which effects resale value and general saleability. Short leases will also have an effect on mortgage ability with many lenders demanding minimum unexpired terms of 70 or 75 years, affecting leaseholder’s remortgaging as well as buyers. Usually a mortgage lender will ask for a lease extension to be completed prior to advancing funds.

Legislation means a leaseholder has to have owned a property for 2 years to be entitled to a statutory lease extension, making it difficult for new buyers. But the existing leaseholder can commence formal proceedings on your behalf, serving the initial notice on the freeholder and then assigning this to you as part of the sale. This allows a purchaser to avoid the 2 year ownership requirement.

Buyers should also beware of sellers obtaining short back to 99 year lease extensions by agreement with the freeholder simply obtained in order to sell. Often in an attempt to keep their capital cost low, outgoing leaseholders agree to excessive annual ground rents and regular increases which the purchaser becomes liable for.

Before purchasing a short lease flat seek appropriate professional advice so that the pitfalls and problems are fully explained and understood, and the price paid reflects the actual lease details.

This entry was posted on Monday, March 18th, 2013 at 9:18 am and is filed under Fresh News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.