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  • Questions Questions Questions !!

    Hello Everyone,

    I have some questions and I'd be very grateful for any advice that anyone can give

    I currently have a flat in edinburgh which I have rented out for the last three years - I am pretty sure there is no CGT due on this nor will I be liable for any significnat amounts for the next couple of years - there is currently around 80K equity in the property and I am drawing off some of this to purchase a second property in England . However , this property needs some work (I think more cosmetic at this point, pending a survey) so I am hoping to 'do it up' and then potentially rent it out next year as I plan to move overseas. My first question is if I do move overseas what is the best tact to take re renting the property out - if I inform my mortgage provider are they likely to agree to the property being let out or would I need to convert to a buy to let mortgage ?

    My second question is that the proprty in question is a leasehold with 125 year lease (starting in 1983) - I have never dealt with a leasehold before and wondered what the most sage approach would be - shoud I have a solicitor check thorugh the lease for any issues - is it possible for me to even consider approaching the freehold owner to agree on a purchase price in the future for the freehold. How does the property value change in line with the remaining lease ? - obviously as it nears the end point the property value must decline but should I even be worried about this considering that I will only hold the property for 10 years or so - should I just ensure the lease is 'reasonable' to save problems later on (i.e if it unreasonable that may impact the poetential saleability of the property) - does any one know any good websites re leasehold properties - it seems it might be a bit of a tricky area

    anyways hope you are still awake after reading this and thanks for any help anyone can give !



  • #2
    Definately get a lawyer to look through the lease agreement. There can be all sorts of clauses and obligations that restrict what you can do with a property such as rent it out or even colours you can paint - depending on who is the leaseholder. It also pays to find out how often the lease amount is reviewed. You can get a nasty surprise when the cost goes up.


    • #3
      Yep definitely run everything past your lawyer. You can try approaching the freehold owner, I doubt they will on sell but you never know, you don't ask you don't get!

      If you do move overseas and you have already purchased the property you don't have to do anything. You completed all your details correctly at the time of taking on your mortgage and circumstances are going to change undoubtedly over the 20-30 years of your mortgage repayments.

      However if you had to change your mortgage every time your circumstances change well frankly you will be forever piled beneath new paperwork! There is no need for you to change your mortgage as I see it!



      • #4
        I'm sure that the mortgage holder (and the insurance company) would appreciate being told of the change in circumstances, when they happen, though.

        There is no point in telling the mortgage holder that you plan to go overseas next year, any more than there is in telling them that you have been 'guaranteed' a £10,000 pay rise next year - who knows what will happen.

        AAaaachhoooo - where's my tissues


        P.S. That's an oblique reference to bridflu, but the way!


        • #5

          I work for a housing association, we have a stock of 15,000 properties. I asked around to see what we do with leasehold properties, and was bascly told if they could be blown up and removed from the planet then life would be great.

          i dug deaper i found that of our 15,000 props about 900 are leashold and they have three people dedicated to management... so although that doesn't answer your question it does indicate they take significant resources to manage.

          In vauge reference to your legal question, ours go to an external legal agent before purchase, and advise was for you to do the same.

          hope that helps a bit.


          • #6
            Hello Pault00,

            Just a couple of coments from your posting.
            1st There will be CGT to pay. Only if it had been your primary residence would you be able to avoid paying CGT. You have up to 4 years of no CGT on your primary residence in the UK. The first 8k GBP of profit though will be tax free (per person per year).
            2nd Tell your mortgage provider that you are going overseas. Most of them will be more than happy to give you at least 1 year grace period. I would try and change the mortgage to a buy to let mortgage (you know you can get 85% LTV in the UK) to keep things clean. If you have a fixed loan look out for penalties upon redemption.
            3rd There are not many hang ups in the UK about leasehold properties. They are very common all over Europe and you should not have a problem with them at all (specially with around 100 years left in it). It gets harder to sell those properties though once you go under the 50-75 years barrier. Your solicitors should always check the lease, but I can not see any problems with it at all.
            I own quite a bit of property in the UK, Spain and NZ. I have gone through the same issues that you are going through and I just hope I have been helpful.
            Cheers, and Best of Luck


            • #7
              I tend to agree with others in that I dont see the point creating possible issues for yourself by saying you could possibly be going overseas next year. Work now on your current situation and assess your situation next year when it happens.

              As far as leasehold is concerned, simliar to above it is very common and lenders are fine with this also - they only really start to question things when there is less than 50yrs + the mortgage term left on the lease (ie. 50 yrs + a mortgage term of say 25 years = 75 years left on the lease). Generally speaking 125 years is fine.