Expiring Lease on House

[faustocoppi]

I've learnt a lot from this forum, however a bit confused by one thing.

I have an friend at the local pub in his 70's

He has a house probably worth £230k (same street go for up to £280k but are in much better condition, his hasn't been modernised)
Ground rent is £6.80 a year never been changed.


He is a leaseholder bought the house in 1970 with 56 years unexpired
It now has only around 13 years left unexpired
He sent an informal letter asking to buy the freehold but the freeholder just said a simple no.

He wants to both secure his place to live till he passes and hand down this to his children.

The only 2 options I see for him are

Buy the freehold through the legal route rough estimate has been around £100k (he doesnt have the money to do this he only has around £30k in saving, neither do his children).

or extend the lease

My main question is this
With so few years unexpired, the freeholder is likely to say it will cost £90k - £100k to extend the lease

There is a law I've seen on houses where you can force a new lease of 50 years on houses. (90 years on flats)
And all he pays is his and the freeholders legal and admin fees.

Why don't people go this route? I know a new lease is written up which starts after the old one expires and the ground rent will go up, but at least he secures his home to stay in till he dies then his children can try to negotiate with the landlord.
What am I missing here?
I'm thinking he secures his place to live his kids still inherit a house with a rubbish lease but at least they can get something for the house say try to sell it to a property developer for £100k it will still have say 40 years on new lease.
The property developer who has money can then offer the freeholder £120k + the £100k to the kids he then does it up and sells it for £300k
Again am I missing something?

[leaseholdanswers]

What you are missing, as asked, is that whether a flat or a house, they have to pay a premium for that extra 50 years or 90 years.

When he purchased in the 70's the problem with leasehold houses was already understood and the Leasehold Reform Act 1967 in place. The advice would have been given that it was a wasting asset and that the lease should and could be extended. it was likely cheap for a reason..............


At the end of the lease there is no new lease. He is entitled to stay as an assured tenant at a Market rent not a ground rent, as if he was renting in the private sector albiet with greater security as as an assured tenant, not assured (shorthold).

Why would a property developer buy it with a 40 year lease?! the owner might want to pay him to get it back early if there were development rights that he could exploit, which would increase the vlaue, if you can persuade him to sell. That at least gives a cash sum to acquire or rent something long term say shared ownership.

Harsh it may seem but when he bought it it was what it was a short 56 years lease that would cost a lot to extend or there would be nothing for his family to inherit. Nowt to do with fairness it is wata it is and you make your choice....

.

[faustocoppi]

Ahhh I get it now thanks so much for your help.

Ok will check, I did actually ask him this a while ago.
How did you get a mortgage with a short lease?

But he told me back in the 60s banks didn't talk about lease extensions much.

Maybe I shouldn't believe what he says on this point.

So I gather his options are?

Stump up £100k buy the freehold
Stump up £100k get a longer lease (Are these usually this sort of price, as in similar to the price of the freehold?

Just forget it and stay as an assured teneant until death

[verylonglease]

He needs to work out the financial implications of each option and then decide.

The freeholder is not obliged to sell the freehold. He may grant a lease extension but that comes with a price. If your friend stays as a tenant after lease expiry, then he needs to compare the rental cost per month x 12 x the number of years he thinks he may live with the premium to pay up front to extend the lease. Better yet is to calculate how many years of rent will reach the level of the lease extension premium. If he stays as a "market" tenant, he needs to have written confirmation from the freeholder that he can do so.

[leaseholdanswers]

Well sort of in that I also suggested that if there is development value, then the freeholder might pay over and above the current value to get the house back 13 years early.

[faustocoppi]

Am going to advise him tomorrow.

I know it's his fault but what a shame, he's paid £200k and paid his mortgage all done through his life now he owns nothing.

[faustocoppi]

Also here's where were at, you can agree or disagree.
This guy paid all his life and got zero.
I live in one of the most expensive parts of London.
At my local pub they may put up the money for this guy to buy his freehold, there talking about it now.
However what strikes me is they all say the same.
They all earn well £500 to £700 a day
They feel sorry for this guy and may bail him out but all say the same

"Good luck with your future Britain, your finished, your crazy laws, where half the establisment own the land rights to everything.
"Good luck, were out of here, we will take the £700 your paying me daily and leave when it ends, and it will end, all the capital flows are going to asia. You really think your homes worth a million good luck with that"

[DNM2012]

Actually your friend bought the right to live in that house for 56 years, assuming he paid his mortgage off after 25 years, he has been able to live there for upto 31 years rent and mortgage free. Not such a bad deal in London, one of the most expensive cities in the world, where ironically property prices are pushed skywards, obviously there are better investments to be made as far as property goes, but he hasn't done so bad!

As other posts mention there is still some potential value there.

[DNM2012]

I'm guessing there has been a bit of moderating going on here, sorry if I over stepped the mark.

[leaseholdanswers]

"Good luck with your future Britain, your finished, your crazy laws, where half the establisment own the land rights to everything.
"Good luck, were out of here, we will take the £700 your paying me daily and leave when it ends, and it will end, all the capital flows are going to asia. You really think your homes worth a million good luck with that"

Pub logic, you have to love it. As always there is a germ of truth, which is topped with the logic- its always "them's" fault

Money goes where money grows it is and always will, and people follow it and seek it out.

The ownership of land has little to do with the establishment, unless you mean councils NHS government buildings etc, the bulk is in private ownership through you guessed it, from money holders, the lenders institutions and bond markets who make their money worldwide to lend mortgages and pay pensions.

And they made a mortgage available to your chum who had a choice to buy a wasting asset, or not.

You pays their( see above) money and takes your choice.

I just hope he realises that in a small way he could be a money man and get advice on potential development value of the house if there is any.