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    • mitkx
    • By mitkx 6th Oct 17, 2:30 PM
    • 13Posts
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    mitkx
    Living away while going through lease extension process
    • #1
    • 6th Oct 17, 2:30 PM
    Living away while going through lease extension process 6th Oct 17 at 2:30 PM
    Hi,

    I am wondering if all you friendly people could give me a bit of assistance here.
    I purchased a 1 bed converted flat back in 2014. The lease was a bit on the low side to the point where marriage value had already kicked in.
    I had to have owned the flat for 2 years before applying to renegotiate the lease so I went with it.
    I have now already kicked off the process of lease renegotiation and have opted to go down the statutory route to give myself 90 years + the outstanding lease left. The freeholder just wanted to make a quick buck out of me and limit the years he gave me and was not interested in negotiating so I have enlisted solicitors to attempt to resolve the issue.
    I am now looking at letting my flat out to move in with my partner as she has a bigger place. I am not interested in selling my flat however and know it will bring me a form of income or I can go back to it if things never worked between living in my partners flat.
    I would like to find out if there would be a problem of lease extension happening if I moved in with my partner and rented out my flat to tenants. Would it create any issues with solicitors, tenants, the bank/mortgage lender or the freeholder if I was not living there and going through the lease extension process.

    Thanks in advance for all your kind advice.
Page 1
    • anselld
    • By anselld 6th Oct 17, 3:16 PM
    • 5,423 Posts
    • 4,988 Thanks
    anselld
    • #2
    • 6th Oct 17, 3:16 PM
    • #2
    • 6th Oct 17, 3:16 PM
    Not living there is not a problem.

    I am not sure Solicitors are the correct persons to manage at this stage though. Normally you would appoint a RICS surveyor to put your valuation case to the First Tier Tribunal. You would have to pay for the Freeholder to do likewise. Once the tribunal has made a determination on value then you can hand it to solicitors to amend the lease.

    Have you served Section 42 Notice?
    • mitkx
    • By mitkx 6th Oct 17, 4:16 PM
    • 13 Posts
    • 0 Thanks
    mitkx
    • #3
    • 6th Oct 17, 4:16 PM
    • #3
    • 6th Oct 17, 4:16 PM
    Hi anselld,

    Many thanks for your reply. I am living there at the moment but due to move in with my partner at some point between Dec 2017 and Jan 2018.

    I had a surveyor come round before I instructed a solicitor to act on this. The surveyor visited, asked questions, asked for documents, took measurements of the property and its pictures and its lease etc before coming back to me with a report of what the lease was worth and where I should start negotiations.

    My solicitor is however on the slow side and has not served a section 42 yet. If it is delayed I might fire him and find another.

    I am hoping if this is still going on while I move out, that the tenant who rents my flat does not end up in the thick of it or if it creates any future issues.
    • da_rule
    • By da_rule 6th Oct 17, 7:24 PM
    • 2,519 Posts
    • 2,230 Thanks
    da_rule
    • #4
    • 6th Oct 17, 7:24 PM
    • #4
    • 6th Oct 17, 7:24 PM
    If the section 42 hasn’t been served yet it’s ublikely to be resolved by January as the freeholder has to be given at least 2 moths to serve their counter notice.

    Part of the section 42 notice is the name and address of the leaseholder. If this changes during the process you just need to let the freeholder know. Although if you’ve instructed a solicitor the correspondence should be through them so it shouldn’t matter.
    • eddddy
    • By eddddy 7th Oct 17, 12:54 AM
    • 5,534 Posts
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    eddddy
    • #5
    • 7th Oct 17, 12:54 AM
    • #5
    • 7th Oct 17, 12:54 AM
    I would like to find out if there would be a problem of lease extension happening if I moved in with my partner and rented out my flat to tenants. Would it create any issues with solicitors, tenants, the bank/mortgage lender or the freeholder if I was not living there and going through the lease extension process.
    Originally posted by mitkx
    Having tenants isn't a problem for the lease extension - except that the freeholder may want their valuer to visit the flat. (So the tenant and valuer will need to agree a date/time etc)

    You will need consent to let from your lender, and maybe your freeholder (check your lease) - but that's nothing to do with the lease extension.
    • mitkx
    • By mitkx 13th Oct 17, 3:06 PM
    • 13 Posts
    • 0 Thanks
    mitkx
    • #6
    • 13th Oct 17, 3:06 PM
    • #6
    • 13th Oct 17, 3:06 PM
    In terms of funding the lease extension, I have been quoted a ball park figure of around £15-16k by my surveyor. I have thought about approaching my lender for this amount as I have built up £50k worth of equity in the property at the moment and I have not got that amount built up in savings at present. If I go ahead and do this now, will I have to remortgage and incur penalties for changing my deal, or is it better to do the lease extension when the 2 year deal with the lender is about to finish (it will finish by mid next year).
    I look forward to hearing your thoughts.
    • eddddy
    • By eddddy 13th Oct 17, 7:38 PM
    • 5,534 Posts
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    eddddy
    • #7
    • 13th Oct 17, 7:38 PM
    • #7
    • 13th Oct 17, 7:38 PM
    In terms of funding the lease extension, I have been quoted a ball park figure of around £15-16k by my surveyor.
    Originally posted by mitkx
    Is that just the premium (price) for the lease extension? Or does it include fees?

    If you go down the 'statutory' route, and the freeholder decides to fight all the way to the tribunal, you could have up to around £4k of fees on top.

    Also, is your surveyor saying that £15-£16k should be your initial offer, or is he saying that's likely to be the final price you would pay (i.e. what a tribunal would decide)?
    • da_rule
    • By da_rule 13th Oct 17, 8:15 PM
    • 2,519 Posts
    • 2,230 Thanks
    da_rule
    • #8
    • 13th Oct 17, 8:15 PM
    • #8
    • 13th Oct 17, 8:15 PM
    Another cost to consider would also be the mortgage cost. Extending the lease has the effect of determining the existing lease and granting a new one. Therefore the mortgage will need to be transferred to the new title which may need a deed of substituted security, which your lender may charge for.

    As has been said, you need to be sure what the quoted value is for. Is it just the premium? If so you need to add your own legal fees and the freeholders legal fees onto that. You will also need at least 10% of the proposed premium ready to go as soon as you serve the notice as the freeholder can (and if they know what they’re doing, will) ask for a 10% deposit to be paid within 14 days.

    In terms of the mortgage lender extending your loan, they may do. If they do, they may agree to pay out some or all of the money on completion so you may have to fund it yourself in the interim. However if you are looking to let the property out, increasing your loan to value may make them less likely to give you consent to let.
    • mitkx
    • By mitkx 30th Oct 17, 10:38 AM
    • 13 Posts
    • 0 Thanks
    mitkx
    • #9
    • 30th Oct 17, 10:38 AM
    • #9
    • 30th Oct 17, 10:38 AM
    Thanks for all your advice above guys, but am facing the following dilemma below, and would like to hear your thoughts regarding this:

    I am in the middle of my mortgage term at the moment and would look to fund my lease extension when I come round to remortgaging as mentioned above, my existing deal runs out in October 2018. This is to avoid the early repayment charge of approx. £4k as I would face now and I can ask my lender (Santander) for a bit more equity as I have built on my property over the last 3 years in order to fund this. I have built up approx.. £50k in the property if I look at present value and the value when I first bought it. I estimate it would take me around 20k to extend this lease and the lender would probably be willing to lend me this given my history.

    Right now it might be a bit impossible to fund this.

    My fixed term mortgage deal runs out in Sept/Oct 2018 before it goes on to the standard variable rate so I would need to be in a position to approach my lender by July 2018 with the estimated cost of what a lease extension might be so I can ask them for additional equity. Would it normally be possible to draw up the paperwork, serve notice to the freeholder and be on negotiating terms to be able to get this far into the lease extension process by then?

    Also, I have a couple of points on my lease on page 2 and 3 (attached) that I am unsure of and need some advice on. Please find written below:

    (c) Not to assign sublet or part with the possession of part only of the flat

    (d) Not to assign sublet or part with the possession of the whole of the flat unless there shall first have been executed at the expense of the tenant and delivered to the landlord for retention by him a deed expressed to be made between landlord of the first part and tenant of the second part and the person or persons to whom it is proposed to assign sublet to part with possession as aforesaid of the third part whereby the person or persons to whom it is proposed to assign sublet or part with possession shall have covenanted directly with the landlord to observe and perform throughout the said term the covenants on the part of the tenant herein contained including this present covenant but excluding in the case of a subletting the covenant to pay the rent hereby reserved

    e) To deliver to the landlords solicitors a notice in writing of every assignment disposition or devolution of or charge on or transfer of title to the flat or any part thereof whether by way of mortgage or otherwise within one month after the execution of any deed or document or after the date of any Grant of Probate or Letters of administration or the perfection of any court order by which such assignment disposition devolution charge or transfer may be effected or evidenced and also at the time of delivering every such notice to produce the deed document instrument or order effecting such assignment disposition devolution charge or dealing and to pay a registration fee of TWENTY POUNDS (£20.00) plus VAT

    Does this mean that there will be issues ongoing if I decided to rent the flat out in the near future and that I would need to seek permission from the freeholder to do this? And also, does this mean that I would not be able to change the lease or extend it if I have rented the place out? Is there any way these kind of clauses could be amended to my benefit?

    Thanks in advance.
    • eddddy
    • By eddddy 30th Oct 17, 11:20 AM
    • 5,534 Posts
    • 5,223 Thanks
    eddddy
    I am in the middle of my mortgage term at the moment and would look to fund my lease extension when I come round to remortgaging as mentioned above, my existing deal runs out in October 2018. This is to avoid the early repayment charge of approx. £4k as I would face now and I can ask my lender (Santander) for a bit more equity as I have built on my property over the last 3 years in order to fund this. I have built up approx.. £50k in the property if I look at present value and the value when I first bought it. I estimate it would take me around 20k to extend this lease and the lender would probably be willing to lend me this given my history.
    Originally posted by mitkx
    Have you asked your lender if your assumptions are correct?

    I'm surprised that you have to wait until the end of your fixed term to arrange additional borrowing.

    See: http://www.santander.co.uk/uk/mortgages/borrow-more-money

    More likely, your current borrowing would emain on the same terms (including the fixed rate period), and the extra £20k you want to borrow may be on different terms.

    Does this mean that there will be issues ongoing if I decided to rent the flat out in the near future and that I would need to seek permission from the freeholder to do this?
    Originally posted by mitkx
    Yes - you have to get the freeholder's permission. This is normal in just about all leases.


    And also, does this mean that I would not be able to change the lease or extend it if I have rented the place out?
    Originally posted by mitkx
    Renting the flat out does not stop you extending the lease.

    What do you mean by "change the lease"? (Although whatever you mean, renting out the flat won't make any difference.)

    Is there any way these kind of clauses could be amended to my benefit?
    Originally posted by mitkx
    Realistically - No.
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