Bank requires the flat im purchasing to have a longer lease..

muggz

hi there,

Im in the process of buying a flat and the bank have come back and said the lease needs to be 99 years (its currently at 70)

I was wondering if anyone has been in this situation and knows the drill. How long would it take for the seller to get an extension, would i be expected to foot the bill? And is it possible to get the seller to pay for it and use that as proof to get the sale sorted out quicker?

thanks everyone!

sablade

tell this to the agent, get a quote from the mananging agent/freeholder could be 10k

then ask the vendor to pay

what does your solicitor say about it?

milliejo

presume its not a new flat and 70 years is whats left on the lease.It should be acceptable to most lenders but is getting rather tight and you are likely to have difficulty selling if you own it for any length of time. Suggest you ask the seller to get the lease extended before you complete. if its in a block all leases are likely to be the same length so the freeholder is likely to be getting asked the same thing everytime a flat is sold

fimonkey

Doozer should be along soon to answer this one, she's the oracle on leases.. but as far as I know...

Be wary, the freeholder can charge a percentage of the property price for extending the lease, so if property prices are falling then you will pay more now than you would in a years time (I think).

Personally, I'd get the vendor to pay, or back out completely. What kinda flat is it? In a block or converted house? Got a rightmove link?

Leasehold is the biggest con on this country imho, only winners are the (often absent) freeholders or robbing management companies.

PasturesNew

This is a well known cut-off point for whether a property is mortgageable or not. The magical 70 years or less.

If a property is 70 years or less it is very hard to get a mortgage, which is often reflected in the price.

It is quicker/easier for the existing owner to extend the lease - find out why they aren't doing it. But if they do then they will put the price up more than what it cost them.

Ways round this are:
- get the owner to extend the lease: takes time, they will then charge for the privilege
- borrow the money by some other means, get the lease extended yourself then remortgage. This will cost you more, carries some risk and will make you tear your hair out.
- find a lender who will lend on a lease under 70 years - this will take some research and be a bit more expensive. e.g. Royal Bank of Scotland. You might also have to stump up a larger deposit than normal.

If you buy it, I believe you can't even start to extend the lease until you've owned it for two years.

With the flat being at 70 years, it gets more expensive and something called a Marriage Value comes into play.

All of this is extra risk to the lender.

Extending is complex.

Read this: http://www.lease-advice.org.uk/levaframe.htm
And this: http://www.lease-advice.org/sportellimain.htm

I hope some of the above is coherent and maybe helps a little. If not, just skim over this and write me off as a loony.

Thank you readers.

muggz

sablade wrote: »

tell this to the agent, get a quote from the mananging agent/freeholder could be 10k

then ask the vendor to pay

what does your solicitor say about it?

Hey thanks for the reply,the solicitor is asking about the cost, thats all ive heard so far...

muggz

fimonkey wrote: »

Doozer should be along soon to answer this one, she's the oracle on leases.. but as far as I know...

Be wary, the freeholder can charge a percentage of the property price for extending the lease, so if property prices are falling then you will pay more now than you would in a years time (I think).

Personally, I'd get the vendor to pay, or back out completely. What kinda flat is it? In a block or converted house? Got a rightmove link?

Leasehold is the biggest con on this country imho, only winners are the (often absent) freeholders or robbing management companies.

Its a maisonette and basically the bank made a mortgage offer based on the assumption that it has 99 years left on the lease. Unfortunately it only has 70. So i cant get a mortgage on it until that part is satisfied. Ive paid the survey fee and the solicitors search fees so i cant really afford to back out

However if the seller turns around and says hey im gonna up the price 10k because of this then im not sure i would still buy it as thats a big amount to suddenly have to pay.

what a drama!

muggz

#

PasturesNew wrote: »

This is a well known cut-off point for whether a property is mortgageable or not. The magical 70 years or less.

If a property is 70 years or less it is very hard to get a mortgage, which is often reflected in the price.

It is quicker/easier for the existing owner to extend the lease - find out why they aren't doing it. But if they do then they will put the price up more than what it cost them.

Ways round this are:
- get the owner to extend the lease: takes time, they will then charge for the privilege
- borrow the money by some other means, get the lease extended yourself then remortgage. This will cost you more, carries some risk and will make you tear your hair out.
- find a lender who will lend on a lease under 70 years - this will take some research and be a bit more expensive. e.g. Royal Bank of Scotland. You might also have to stump up a larger deposit than normal.

If you buy it, I believe you can't even start to extend the lease until you've owned it for two years.

With the flat being at 70 years, it gets more expensive and something called a Marriage Value comes into play.

All of this is extra risk to the lender.

Extending is complex.

Read this: http://www.lease-advice.org.uk/levaframe.htm
And this: http://www.lease-advice.org/sportellimain.htm

I hope some of the above is coherent and maybe helps a little. If not, just skim over this and write me off as a loony.

Thank you readers.

this is amazingly helpful thanks!

im wondering how i can speed things up, but i guess i cant do anything until that lease has extended. I was wondering if there is anypoint where you can say right, the lease is definitely going to be extended but the paper work takes 2 months but the house purchase can carry on because its in writing here thats its gonna happen.

muggz

after reading those links there is a bright side to this (if ive read it right) once the lease gets extended, purchasing the freehold becomes cheaper?

chewmylegoff

muggz wrote: »

Its a maisonette and basically the bank made a mortgage offer based on the assumption that it has 99 years left on the lease. Unfortunately it only has 70. So i cant get a mortgage on it until that part is satisfied. Ive paid the survey fee and the solicitors search fees so i cant really afford to back out

However if the seller turns around and says hey im gonna up the price 10k because of this then im not sure i would still buy it as thats a big amount to suddenly have to pay.

what a drama!

you really should have checked up on the lease length before getting this far down the road towards buying, a lesson learned i suppose. next time be sure to ask when you are viewing for the first time.

shame the EA didn't flag up the lease length to you when you were looking. shame the solicitor didn't find out right at the start either. but neither of them have any particular duty to do so.

you say you can't afford to pull out now, but you may end up paying a lot more in order to extend than you have already put down in mortgage / professional fees.

personally i think the first thing you should do is ask the seller how much it is going to cost to do this. you want a solid quote from the freeholder which includes an estimate for legal fees (you are responsible for paying the legal fees for you and the freeholder, as well as the lease premium).

after you get this quote, tell the seller you want them to pay it. if they say no then reduce your offer by the amount it costs to extend the lease. make it clear that you can't get mortgage finance with the lease as it is and you won't be able to complete unless they give some leeway.

if you can't get this done without the seller paying most or all of the cost, then pull out and take the loss on your fees so far and don't make the same mistake again. better than getting screwed for thousands.

note that if you're going to pay for this you will need the cash up front - the lease will have to be extended before completion otherwise your mortgage won't get arranged. this may mean you have to put thousands of pounds at risk before exchanging contracts. i) you need the money in cash ii) you need to make sure you don't get screwed by the seller somehow.

i was quoted £14k to extend a lease on a £320k flat that was down to 72 years. that was before legal bills. won't necessarily be in exact proportion but that may give you an idea. the seller refused to pay for it to be extended, and their flat is still on the market 3 months later (priced the same as several flats with much longer leases, so they have no prospect of selling).

assume that:

i) the flat is not share of freehold (this would probably make it cheaper to extend the lease, but not necessarily).

ii) you are not buying the flat at a deep discount to other similar properties on the market (which don't have this lease problem).

fatpig_2

chewmylegoff wrote: »

.

shame the EA didn't flag up the lease length to you when you were looking. shame the solicitor didn't find out right at the start either. but neither of them have any particular duty to do so.



).

Isn't the length of the lease supposed to be clearly stated in the HIP document which they are duty bound to provide a copy of?