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    • richdeniro
    • By richdeniro 13th Oct 16, 1:06 PM
    • 218Posts
    • 138Thanks
    richdeniro
    Lease Extension Problem with HSBC Mortgage
    • #1
    • 13th Oct 16, 1:06 PM
    Lease Extension Problem with HSBC Mortgage 13th Oct 16 at 1:06 PM
    I had an offer accepted for 200k on a one bedroom flat where the lease was down to 77 years however the current owner was going to extend the lease to 99 years upon completion.

    I used L&C as my mortgage broker and they got me a HSBC mortgage for 160k with myself providing a 40k deposit.

    Everything seemed to be going smoothly until last week when my broker phoned and said that due to the valuation changing because of the expiring lease HSBC will now only lend 145k and apparently they will not change the valuation back until the lease is extended so it must be done before completion.

    I thought it was fairly common that a lease extension be done on completion and the lender would accept that especially as all the paperwork is in order.

    Am I going to have to go through the whole mortgage application process again with a different lender now?

    I don't think the vendor has the finances in place to extend the lease before completion and I am now worried that if it is delayed further due to having to apply for another mortgage he will just pull out altogether.
Page 1
    • always_sunny
    • By always_sunny 13th Oct 16, 1:13 PM
    • 1,766 Posts
    • 2,081 Thanks
    always_sunny
    • #2
    • 13th Oct 16, 1:13 PM
    • #2
    • 13th Oct 16, 1:13 PM
    I had an offer accepted for 200k on a one bedroom flat where the lease was down to 77 years however the current owner was going to extend the lease to 99 years upon completion.

    I used L&C as my mortgage broker and they got me a HSBC mortgage for 160k with myself providing a 40k deposit.

    Everything seemed to be going smoothly until last week when my broker phoned and said that due to the valuation changing because of the expiring lease HSBC will now only lend 145k and apparently they will not change the valuation back until the lease is extended so it must be done before completion.

    I thought it was fairly common that a lease extension be done on completion and the lender would accept that especially as all the paperwork is in order.

    Am I going to have to go through the whole mortgage application process again with a different lender now?

    I don't think the vendor has the finances in place to extend the lease before completion and I am now worried that if it is delayed further due to having to apply for another mortgage he will just pull out altogether.
    Originally posted by richdeniro
    I haven't started my extension though from all reading I have done it never really just happens on completion. The current owner would need to serve a S42 for the statutory extension and that could take between 3 to 12 months or longer. Once served, they would then assign you the rights to continue but at completion time it will still be pending.

    Informal extension might be quicker but usually not on better terms for you and the flat and still do take few months. Anything with a solicitor involved takes ages in England as I have discovered!
    here on an EU passport.
    • Bossypants
    • By Bossypants 13th Oct 16, 1:22 PM
    • 398 Posts
    • 723 Thanks
    Bossypants
    • #3
    • 13th Oct 16, 1:22 PM
    • #3
    • 13th Oct 16, 1:22 PM
    Informal extension might be quicker but usually not on better terms for you and the flat and still do take few months. Anything with a solicitor involved takes ages in England as I have discovered!
    Originally posted by always_sunny
    This is what happened on my last purchase. The vendor and the freeholder were on good terms and the freeholder was available and responsive, but the whole thing still took 8 months to resolve. If I had been buying with a mortgage, it would have expired by the time we were ready to exchange.
    Mortgage Overpayment Aim - £20,000 in 2016
    Progress: £1/20,000
    • eddddy
    • By eddddy 13th Oct 16, 1:51 PM
    • 3,859 Posts
    • 3,491 Thanks
    eddddy
    • #4
    • 13th Oct 16, 1:51 PM
    • #4
    • 13th Oct 16, 1:51 PM
    I thought it was fairly common that a lease extension be done on completion and the lender would accept that especially as all the paperwork is in order.
    Originally posted by richdeniro
    Yes - I would agree.

    Has there been a misunderstanding somewhere?

    I'd be tempted to call HSBC direct, to ask if they have a problem with lease extensions on completion.

    Of course it could be something slightly different, like they have a problem with the specific informal lease extension that your seller has negotiated - perhaps the ground rent.


    Edit to add...

    For the benefit of other posters on the thread, what has presumably happened here is:

    - The freeholder agrees to extend the lease on a specific completion date
    - The leaseholder agrees to sell the leasehold on the same completion date
    - The OP buys the new extended leasehold on that same completion date

    So
    3 people simultaneously exchange contracts on the same day
    3 people simultaneously complete on the same completion day

    So the freeholder has presumably already agreed the terms of the lease extension.

    But if the freeholder hasn't agreed - that would be the cause of the problem.
    Last edited by eddddy; 13-10-2016 at 2:09 PM.
    • always_sunny
    • By always_sunny 13th Oct 16, 2:08 PM
    • 1,766 Posts
    • 2,081 Thanks
    always_sunny
    • #5
    • 13th Oct 16, 2:08 PM
    • #5
    • 13th Oct 16, 2:08 PM

    So the freeholder has presumably already agreed the terms of the lease extension.
    Originally posted by eddddy
    In England, in the world if real estate buying nothing can be presumed till everything is exchanged and completed
    here on an EU passport.
    • eddddy
    • By eddddy 13th Oct 16, 2:17 PM
    • 3,859 Posts
    • 3,491 Thanks
    eddddy
    • #6
    • 13th Oct 16, 2:17 PM
    • #6
    • 13th Oct 16, 2:17 PM
    In England, in the world if real estate buying nothing can be presumed till everything is exchanged and completed
    Originally posted by always_sunny
    What specific scenario are you suggesting might occur?

    If you re-read my post, you'll see it says:


    3 people simultaneously exchange contracts on the same day
    3 people simultaneously complete on the same completion day
    Originally posted by eddddy
    • richdeniro
    • By richdeniro 13th Oct 16, 2:20 PM
    • 218 Posts
    • 138 Thanks
    richdeniro
    • #7
    • 13th Oct 16, 2:20 PM
    • #7
    • 13th Oct 16, 2:20 PM
    Yes - I would agree.

    Has there been a misunderstanding somewhere?

    I'd be tempted to call HSBC direct, to ask if they have a problem with lease extensions on completion.

    Of course it could be something slightly different, like they have a problem with the specific informal lease extension that your seller has negotiated - perhaps the ground rent.


    Edit to add...

    For the benefit of other posters on the thread, what has presumably happened here is:

    - The freeholder agrees to extend the lease on a specific completion date
    - The leaseholder agrees to sell the leasehold on the same completion date
    - The OP buys the new extended leasehold on that same completion date

    So
    3 people simultaneously exchange contracts on the same day
    3 people simultaneously complete on the same completion day

    So the freeholder has presumably already agreed the terms of the lease extension.

    But if the freeholder hasn't agreed - that would be the cause of the problem.
    Originally posted by eddddy
    Could it be that the solicitor or broker hasn't done their job properly and informed HSBC of the details do you think?

    I just spoke to the Estate Agent who seems to think that the lease has now been extended and we are just awaiting paperwork in the post so am now even more confused.
    • eddddy
    • By eddddy 13th Oct 16, 2:29 PM
    • 3,859 Posts
    • 3,491 Thanks
    eddddy
    • #8
    • 13th Oct 16, 2:29 PM
    • #8
    • 13th Oct 16, 2:29 PM
    Could it be that the solicitor or broker hasn't done their job properly and informed HSBC of the details do you think?
    Originally posted by richdeniro
    That would be my first guess - which is why I suggested calling HSBC directly.

    I just spoke to the Estate Agent who seems to think that the lease has now been extended and we are just awaiting paperwork in the post so am now even more confused.
    Originally posted by richdeniro
    If that's the case, the seller should have a copy of the extension deed to hand - ask the EA to get a copy for you (so you have some real evidence) - as opposed to the word of a potentially confused EA.

    And check the new ground rent! It could be an issue.
    • always_sunny
    • By always_sunny 13th Oct 16, 3:46 PM
    • 1,766 Posts
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    always_sunny
    • #9
    • 13th Oct 16, 3:46 PM
    • #9
    • 13th Oct 16, 3:46 PM
    What specific scenario are you suggesting might occur?

    If you re-read my post, you'll see it says:
    Originally posted by eddddy
    Can any of these 3 people pull out and no question asked?
    here on an EU passport.
    • eddddy
    • By eddddy 13th Oct 16, 8:24 PM
    • 3,859 Posts
    • 3,491 Thanks
    eddddy
    Can any of these 3 people pull out and no question asked?
    Originally posted by always_sunny
    What is it that you don't you understand?
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