My partner and I recently ended our relationship, and we are currently in the process of selling our property. My objective is to relocate closer to my workplace located in London.
Everything is extremely pricey, and I do not wish to make a substantial monthly mortgage payment.
I am contemplating searching for a city-center apartment with an extremely short remaining tenancy, perhaps twenty years from now.
Although I am cognizant of the potential challenges associated with the future resale of a flat with such a short tenancy, it would enable me to acquire the property in cash as opposed to utilizing a mortgage.
I may potentially have the opportunity to extend the lease or acquire a freehold share in the future, particularly if the leasehold reform measure is enacted.
I have viewed a number of apartments, and their respective values appear to be astronomical.
How can I ascertain the value of a short leasehold property and calculate the potential cost of a leasehold extension in the near future?
Is it possible to extend the tenancy using a mortgage after I become the owner? Any assistance is greatly appreciated.
Investing in a short leasehold flat entails certain evident drawbacks.
Nonetheless, the possibility of leasehold reform presents an opportunity, at least for those willing to assume the associated risk.
Numerous apartments in England and Wales are sold with a lease that grants the lessee occupancy for a specified period of time.
The right to use the flat expires at the conclusion of this period, and the freeholder, who possesses the land on which the flat is constructed, reclaims it.
The notion that you may be purchasing an item for a maximum of twenty years before it is reclaimed by the freeholder may resemble entering into a lengthy tenancy agreement rather than truly owning the property.
Ground rent may also be an additional expense.
However, it may still make sense to some individuals. As you correctly note, it may provide a more economical means of accessing a costly region that would be financially unattainable otherwise.
Nonetheless, you must be cognisant of the fact that you are investing in a niche segment of the real estate market.
Due to the fact that mortgage lenders will not lend on short leasehold homes unless the tenure is extended, you will also have to rely on cash buyers when the time comes to sell.
Leasehold Reforms and Expert Consultation
Buying into a depreciating asset is a distinct possibility, especially if the real estate market experiences a period of relative stagnation or declines throughout the ownership tenure.
In theory, the expense of a leasehold home ought to decrease as the lease term progresses. However, this cannot be guaranteed; in fact, the reversal could theoretically occur in the event of an abrupt surge in housing prices.
As you astutely note, the forthcoming reforms in England and Wales are anticipated to grant leaseholders increased rights and authority concerning their residences.
At this time, the Leasehold and Freehold Reform Bill is being considered by Parliament. In addition to the time required for it to become law, it is also subject to rejection or amendment.
The law seeks to simplify and reduce the cost of lease extensions and freehold purchases. This will entail the elimination of the ‘marriage value,’ an escalating cost associated with lease extensions nearing their expiration date.
We consulted Shabnam Ali-Khan, a partner at law firm Russell-Cooke and a member of the Association of Leasehold Enfranchisement Practitioners; David Fell, senior analyst at Hamptons; and Linz Darlington, proprietor of lease extensions specialists Homehold, in pursuit of expert guidance.
