Lease Extension

Hi there,

My flat is currently on the market....1 bed ground floor in Herts, on for £135000. I have had a couple of offers recently, one being for the full asking price if I exted the lease, the most recent was for £123000 due to the lease being so low. The lease has 67 years remaining. The estate agents are quite pushy and are telling me that I should basically take a low offer because of the low lease.

I have used an online calculator for an estimate of the lease extension and it gives the price of £10500. Is this about right?

Do mortgage companies not lend on a leasae this low?

Will it increase the value of my flat?

I hope you can help

Thanks

Michelle

Hi Michelle,

With lease valuations, even where you have a fully qualified and experienced surveyor carry out a valuation for you, for the purposes of a lease extensuion, it is a non-exact science and the freeholder's figures will no doubt be higher. However, let's assume you could get a new lease for £10,500. Once you add in the additional legal costs (you will also have to pay the freeholder's legal costs) and possible the freeholder's valuation costs, it is likely the premium and fees will amount to around £12,500-£13,000 in total.

It is very unlikely you will be able to sell the flat at the correct market price until you extend the lease. This much you already know from experience.

So, if £10,500 is about the right valuation for a lease extension, my advice would be for you to accept the £123,000 offer. The alternative is that you hold out for the full market price and extend your lease now. Extending the lease now may cause delays. Furthermore, can you guarantee the freeholder will (a) respond to a request to extend the lease or (b) respond with a reasonable offer? I suppose one way of finding out is to approach the Landlord now to ask whether they will extend the lease term and if so on what terms?

Bear in mind that if you do get a response from the freeholder, you are technically obliged to divulge this information to a potential buyer. So, if the freeholder responded with say £15k premium request, this might put off that £123k buyer or result in them amending their offer downwards.

Good luck!

Tom