Extending your lease – let’s all be civil, shall we?
From the minute I put an offer in for my flat, I knew that the 73-year lease was too short. But what I didn’t realise was that purchasing a lease can easily be done informally. Here’s why I think it’s good to talk…
I’m in the process of buying what I can only describe as ‘an incredibly expensive piece of paper’.
My bank is happy to class it as a ‘home improvement’ and lend me a bit extra on my mortgage, but I won’t have anything particularly exciting to show for it. No shiny new bathroom, no smart double-glazing, not even a lick of paint in the lounge. All I’ll get is a piece of paper saying my flat’s lease will be 90 years longer.
When I bought my flat I knew the lease would be a problem – although 73 years sounds like a long time (73 years ago World War Two was just beginning) – in the world of leasehold properties it’s actually quite short.
If your lease drops below 80 years it suddenly costs much more to renew it, as you have to pay an extra chunk of money to your freeholder (called the ‘marriage value’). If your lease drops further, below 70 years, it’s difficult to get a mortgage on the property and therefore trickier for you, the owner, to sell the flat.
How to extend your lease
The good thing about leasehold flats is that there are laws in place that give you the right to buy your lease after you’ve lived in the property for two years. The bad news is that it can be an expensive process.
You have to have a solicitor serve a ‘Section 42’ notice on your freeholder, then you must pay for valuation of the lease and for the freeholder’s own valuation. Finally, when your solicitors have negotiated a price and the transaction’s gone through, you’re also liable for the costs of both parties’ solicitors. Ouch.
I was, however, surprised that many solicitors and advice websites presented this as the only option. It’s an expensive process, with a lot of the money going to solicitors who spend time negotiating the price of the lease. Surely we – as civilised human beings – can simply discuss the price informally and make an agreement? That way when we instruct solicitors to deal with all the paperwork, it will be quicker (good for both of us) and cheaper (good for me).
Informal leasehold purchase
Well, I’m pleased to say that it is possible. Rather than serving a ‘Section 42’ notice on my freeholder, I dropped him an email. I explained the situation and we came to an agreement on getting the flat valued. When the valuation report came back, we had a discussion and agreed a final price.
We’re now engaged in the boring back-and-forth of getting things finalised, but I’m pleased to say that by doing DIY negotiations, we’ve managed to agree a fair price and save me a bit of money in the process. But how many people know this is possible? I’d guess not many, as the ‘informal leasehold purchase’ process isn’t widely publicised, and (for good reason) not many solicitors want to draw your attention to it.
The informal route might not always be desirable – if your stomach turns at the thought of having to negotiate money or even if you just don’t have the time – but it’s certainly an option I’d urge you to consider. Solicitors do a great job sometimes, and they’re crucial for hammering out the nitty-gritty, but sometimes we can save a lot of money by simply talking to each other.
With my new-found DIY skills, I’m keen to see if there are any other situations where we could cut out the middle man and discuss things to save money.
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