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Turned Out Nice Again

Flat purchase with "New lease on completion", any experience of?

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I'm buying a flat specifying "New lease on completion" on the sale details but which is turning out to be more complicated than I expected. I was also surprised to find out yesterday that the current lease has only only 57 years (of 99) remaining.

Apparently, a notice has been served by my sellers to the Freeholder applying a new lease, which application will presumably be passed on to me as a benefit "on completion" - all costs to be met by them. The problems I have are:

- how do I get a mortgage on a 57 yr remaining lease prior to completion?
- the particulars of the lease would need to be worked out and agreed prior to exchange of contracts, legals for which I've been informed by my solicitor will add £450 to her bill!
- I suspect the sellers are planning to use my deposit to fund the lease extension. In which case, what happens if the sale falls through? Will I get my money back? Of particular concern is that the sellers are now residing in Australia. Should I be considering some kind of Sale Completion insurance? And should they pay the premium?

Any ideas? Does this all sound kosher?

Edited by Turned Out Nice Again

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1 minute ago, Turned Out Nice Again said:

I'm buying a flat which specified "new lease on completion" on the sale details which is turning out to be more complicated than I expected. I was also surprised to find out that the current lease has only only 57 years (of 99) remaining.

Apparently, a notice has been served to the Freeholder applying a new lease, which application will presumably be passed on to me as a benefit "on completion" - all costs to be met by the seller. The problems I have are:

- how do I get a mortgage on a 57 yr remaining lease prior to completion?
- the particulars of the lease would need to be worked out and agreed prior to exchange of contracts, legals for which I've been informed by my solicitor will ad £450 to her bill!
- presumably the sllers are planning to use my deposit to fund the lease extension. In which case, what happens if the sale falls through? Will I get my money back? Of particular concern is that the sellers are now residing in Australia.

Any ideas? Is this all kosher?

Have not a clue but two things spring to mind

  1. make sure the other side pays the extra legal costs
  2. they surely can’t use your deposit for this. It should be held in a solicitor account

oh, and check the new lease carefully to check that onerous terms have not been added such as massively stupid increases in ground rent. 

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This is a good guide to extending a lease which is worth reading carefully in your position; I actually come at from the other side (professionally; I'm not a landlord myself) so have also been through it carefully:

https://www.moneysavingexpert.com/mortgages/extend-your-lease

As you're looking at the 60 year mark it will cost £24k to extend but add £38k to the value - i.e what you pay.

So they are using your money to take another £14k off you.

Personally I would tell them to bugger off; but if you're happy gifting another £14k to the sellers then you go right ahead.

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26 minutes ago, Frank Hovis said:

This is a good guide to extending a lease which is worth reading carefully in your position; I actually come at from the other side (professionally; I'm not a landlord myself) so have also been through it carefully:

https://www.moneysavingexpert.com/mortgages/extend-your-lease

As you're looking at the 60 year mark it will cost £24k to extend but add £38k to the value - i.e what you pay.

So they are using your money to take another £14k off you.

Personally I would tell them to bugger off; but if you're happy gifting another £14k to the sellers then you go right ahead.

Very good point Frank and one I had considered myself. When I made my offer to them, I had assumed that the existing lease would be 80+ at least but could get no figure from them when i enquired through the estate agent. Sounds like I need to renegotiate everything from scratch.

Say the flat with a 99+ lease would be worth £238K, I should be getting it for £200K and paying to extend the lease myself. But that still doesn't help me get a mortgage on it.

Edited by Turned Out Nice Again

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1 minute ago, Turned Out Nice Again said:

Very good point Frank and one I had considered myself. When I made my offer to them, I had assumed that the existing lease would be 80+ at least but could get no figure from them when i enquired through the estate agent. Sounds like I need to renegotiate everything again.

Or walk away... they don’t sound very trustworthy. 

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8 minutes ago, One percent said:

Or walk away... they don’t sound very trustworthy. 

Maybe. There are other issues that I want addressed wrt. private parking spaces and restoration of the external slightly tatty decor (who pays?). The ground rent is a paltry £250 pa so there can't be much of a pot available for repairs. I've no idea who owns the other 3 flats in the building and whether they are all owner-occupiers or some are rented out though a profusion of ciggie butts scattered around the entrance lobby would tend to suggest the latter.

Edited by Turned Out Nice Again

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4 minutes ago, Turned Out Nice Again said:

Maybe. There are other issues that I want addressed wrt. private parking spaces and restoration of the external slightly tatty decor (who pays?). The ground rent is a paltry £250 pa so there can't be much of a pot available for repairs. I've no idea who owns the other 3 flats in the building and whether they are all owner-occupiers or some are rented out though a profusion of ciggie butts scattered around the entrance lobby would tend to suggest the latter.

Look at it all carefully. The ground rent may be 250 now but on a new lease they can write anything in. Be careful of ones where the ground rent is linked to rpi. 

I am a freeholder and one of the leases went to around 55 years. It cost them 28k plus all the legal costs to extend. 

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1 minute ago, Turned Out Nice Again said:

Maybe. There are other issues that I want addressed wrt. private parking spaces and restoration of the external tatty decor (who pays?). The ground rent is a paltry £250 pa so there can't be much of a pot available for repairs. I've no idea who owns the other 3 flats in the building and whether they are all owner-occupiers or some are rented out though a profusion of ciggie butts scattered around the entrance lobby would tend to suggest the latter.

You own the flat from the wallpaper in.

The rest of the structure is owned by the freeholder who will do the work and then bill you for it with an admin charge ?15%.

If the freeholder can't be arsed then the communal areas, roofs, walls will just decay and leak and you will have zero chance of ever selling it and your flat will be cold, damp, smelly and mouldy.

If the freeholder is rapacious then they will try to diddle you by having their brother do the work at an enormous mark up.

The worst case is some cosy freehold management company co-owned by the residents because if one won't pay up then you won't be able to make them.

Unless you have a totally responsible freeholder - the council or a hosuing association - I genuinely would not conside buying a leasehold flat in Engalnd.  I would, as I have done, rent it instead then it is not my problem.

The ground rent is just that; it does not contribute to repairs.

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I love living in an apartment, much preferable to a house - but I don't think I'd want to own one based on the stories I've heard.

Basically most blocks seem to be badly managed, with the apartment owners having to soak up the cost of this. Heard stories of lots of sales not going through in several of the big blocks here because of legal issues around management of the block.

You seem to have gone for the lowest risk option - i.e. a small block of 3 or 4 flats. But I'd still have a chat with your neighbors before buying - just head over some evening and ring their bell for a chat - that's what I did when I was considering a flat recently.

Having said that apartments are BTL fodder so you never know who's gonna be there 6 months from now - would it cost you much more to buy a small house in the same area?

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12 hours ago, Frank Hovis said:

If the freeholder can't be arsed then the communal areas, roofs, walls will just decay and leak and you will have zero chance of ever selling it and your flat will be cold, damp, smelly and mouldy.

Block I'm in has maintenance charges of £1200 per apartment per year. I figured this also covered repairs - it does not - they have no sink fund built up and there is a £15,000 bill coming for repairs that's gonna have to be split up among the apartment owners. On top of the £1200 they're paying to get the hallways vacuumed.

Edited by JoeDavola

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13 minutes ago, JoeDavola said:

Block I'm in has maintenance charges of £1200 per apartment per year. I figured this also covered repairs - it does not - they have no sink fund built up and there is a £15,000 bill coming for repairs that's gonna have to be split up among the apartment owners. On top of the £1200 they're paying to get the hallways vacuumed.

My mate is in a block, converted Victorian. The sea views are to die for. 

There is a clause in the lease that state no holiday letting. Yet the flat above hers lets out for holidays. Makes my mates life a living hell with full on polarities and screaming kids rotating on a weekly basis. 

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13 hours ago, Turned Out Nice Again said:

Maybe. There are other issues that I want addressed wrt. private parking spaces and restoration of the external slightly tatty decor (who pays?). The ground rent is a paltry £250 pa so there can't be much of a pot available for repairs. I've no idea who owns the other 3 flats in the building and whether they are all owner-occupiers or some are rented out though a profusion of ciggie butts scattered around the entrance lobby would tend to suggest the latter.

The ground rent might be a paltry £250 but what about the service charge? just see you haven’t missed this one out.

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11 minutes ago, longtomsilver said:

The ground rent might be a paltry £250 but what about the service charge? just see you haven’t missed this one out.

Yeah had been wondering this myself - had figured maybe there wasn't one since it's such a small block but that's probably rather naive of me!

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The big question is,

'Why don't the present owners get the lease extended?'

You get a similar one with houses where the lease has only 10-30 years left to run and the aspirational ding head owners want to sell without either buying the freehold  or extending the lease.

Think of it like buying a car with only a weeks MOT left to run on it.

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26 minutes ago, Byron said:

The big question is,

'Why don't the present owners get the lease extended?'

You get a similar one with houses where the lease has only 10-30 years left to run and the aspirational ding head owners want to sell without either buying the freehold  or extending the lease.

Think of it like buying a car with only a weeks MOT left to run on it.

Why don't they? Or why didn't they? I wonder? They have emigrated to Australia - that's all I know.

I'm going to go there now and ring some bells for a chat.

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Just now, Turned Out Nice Again said:

Why don't they? Or why didn't they? I wonder? They have emigrated to Australia - that's all I know.

I'm going to go there now and ring some bells for a chat.

Bargepole, touch.

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Finally managed to talk to one of the other flat residents last night, from which it transpired:

- the parking space allocated to my flat is smaller than was stated and is sandwiched behind that allocated to another flat
- parking has been a subject of acrimony ipreviously, such that my seller got solicitors involved
- all of the other 3 flats are rented out with the flat immediately above my 2nd bedroom being an AirBnB attracting groups of partying foreigners in the past (less so now)

... which along with the lease problem, puts the kibosh on it for me. I'm out.

Back to square one.

Edited by Turned Out Nice Again

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1 minute ago, Turned Out Nice Again said:

Finally managed to talk to one of the other flat residents last night, from which it transpired:

- the parking space allocated to my flat is smaller than was stated and is sandwiched behind that allocated to another flat
- parking has been a subject of acrimony ipreviously, such that my seller got solicitors involved
- all of the other 3 flats are rented out with the flat immediately above my 2nd bedroom being an AirBnB attracting groups of partying foreigners in the past (less so now)

Which along with the lease problem, puts the kibosh on it for me. I'm out.

Back to square one.

Run away, quickly...

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1 hour ago, Turned Out Nice Again said:

Finally managed to talk to one of the other flat residents last night, from which it transpired:

- the parking space allocated to my flat is smaller than was stated and is sandwiched behind that allocated to another flat
- parking has been a subject of acrimony ipreviously, such that my seller got solicitors involved


So have they declared this neighbour dispute?

 

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20 minutes ago, sarahbell said:


So have they declared this neighbour dispute?

 

I think you need to ask if you do not ask then I believe they do not need to offer up the information. If you ask then if it is a formal dispute they must declare or you have redress to law if you purchase and there is a problem. Not a lawyer but if there is only 'words' between parties it is not a formal dispute, solicitor involvement certainly is. If there has just been 'words' they could probably not declare even when asked as they 'could not recall ....'  difficlut to prove ... not so with letter in writing from a solicitor.

On the lease (may have changed this is from a few years ago) you need to be the owner of the lease for two years before you can extend, hence the extension on completion ie when the current owners are still the owners and of course the extension cost increases exponetially every year. If the flat is worth 200k the extension cost with be essentiall 200k - a years 'rent' of say 8k ie 192k.

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Just now, satch said:

I think you need to ask if you do not ask then I believe they do not need to offer up the information.


Isn't it covered in the PIQ these days and everyone has to sign a declaration of no neighbour issues?

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