We were recently asked our conveyancing advice regarding the purchase of a leasehold property that only had 65 years left on its lease. We provided the client with a couple of different options available to them.
Q. We want to buy a flat, but the agent says the lease is very short, about 65 years he thinks, and he believes that is why the flat is cheap. He also says we may be able to extend the lease but has given no other information. The flat is lovely, and we want it. We have never bought a leasehold flat and don’t really understand why it is so cheap. Does it really matter or should we walk away? Could we extend the lease easily?
A. The value of the property usually decreases as the length of the residential lease gets shorter. Unfortunately, you are unlikely to get a mortgage on the flat in view of the short lease, and even if you could get a loan, the terms on the loan are unlikely to be favourable.
Establish whether the landlord is prepared to grant a new lease to the seller, which should be completed before, or at the same time that you complete the purchase of the flat. If you are likely to get a longer lease at completion, a lender may be prepared to lend to you.
If the landlord will not do this, then, provided the seller has owned the flat for at least two years, they have a statutory right to extend the lease, although there are some exceptions. The seller could start this process by serving an initial notice on the landlord, the benefit of which can be transferred to you on completion. This is a complex and often costly procedure, but genuinely worth it as the value of the flat is likely to increase once the lease is extended. Instruct a solicitor who is specialist in this field. You will need a specialist surveyor too.
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For specific advice regarding the purchase of leasehold residential properties, please get in touch with our team of experts.