Extending a leasehold

missey_2

in the process of buying a flat...putting down 35k on a 100k purchase. Recieved a letter from mortgage lender saying flats 65 yr remaining lease is below their min requirements to lend on.
What happens now?...can seller extend lease by say 90yrs?...who pays?...how much?...

Tustastic

Hi Missey, am no expert, have only my own buying/selling experience. I understand many lenders will only lend on domestic properties with 75 years or more left on the lease. 65 years is a short lease and ,should be/perhaps was, reflected in the price of the property. Suggest you talk to the EA tomorrow, tell them about the letter and ask them to inform the seller. it's their move then.
The leaseholder can go to the freeholder and negotiate to pay for extending the lease. Years ago I got rid of a leasehold flat with 85 year lease sharpish when I found out from other people that the freeholders would only agree extensions to 90 years. It was a bit of business for them, making people pay for lease extensions regularly.

missey_2

hi...thanks for reply...i would want 90yrs added to remaining lease so i`m not in same position myself one day.

Julysea

You'll need to get the current owners to ask the freeholders for a quote on price to lengthen the lease, this could be very expensive so don't even consider buying it until you have in writing exactly the offered price on this. Then you'll need to see if the current owners are willing to pay for it. I'm having to do this on the maiosnette we're selling and it's a nightmare. We've had to pay out 6 grand to extend the lease for the flat and garage back to their origianl 125 years plus almost 2 grand in fees. And it's taken 6 months so far and still not sorted. Not trying to put you off, but just be wary and find out all the facts before you commit yourself in any way.

missey_2

I`m surprised the EA didn`t mention the length of lease remaining (or should i be). I`m prepared to part fund some...but 8k in total and 6 months in time seems a lot.

Tustastic

£2K in fees to extend the lease is very high. Last year (long story) I negotiated selling a leaseholder a lease extension. I think they paid their solicitor about £250 to do the work. Perhaps the lease extension I was involved with was a particularly simple deal. Plus, I know the leaseholders and they are demon moneysaving negotiators.:)

continualdiamond

Can you not reduce your term of mortgage???

Only asking as just bought a leasehold place with a 69 year lease. It was advertised as a 75 year lease and my lender was more than happy, but when it emerged it only had 69 year lease i had to reduce my mortgage term in order to meet my lenders requirements.

Maybe worth asking, if you haven't already.

Doozergirl

Your vendor will be very lucky to find a buyer if their price does not reflect the length of lease.

They should extend and at their own cost if what you are paying is full market value. It will take time and you should be prepared to wait, unless you can get agreement from the freeholder to sell to you when you buy the property and reduce the term of your mortgage accordingly (or find a different lender). BUT you need to know full costs for their solicitors fees, the managing agent's fee (if the is a MA), your solicitors fee for the extension as well as the basic extension as these do add £1-2k to the price. You need to move sharpish on it when you move in as the valuation changes with time and house prices.

Advice given above that freeholders only extend to 90 years is untrue. What is true is that after two years of owning the property, you can force the freeholder to sell you a further 90 years! The idea is to reduce the number of times a lease has to be extended, not increase!

missk_ensington

When you bou a leasehold property, essentially you are renting it but paying your rent in huge lump sum for X am ount of years - in your case 65 years. When that runs out thje Freeholder has an obligation to allow you to renew as a protected tenant, but its debateable for how much and how long - there are all dictated by the terms of your lease.

The Freeholder could charge another 100k to double your lease length, and leasehold properties are the only ones which, generally speaking, decrease in value rather than increase because you may pay £100k for 100years and live there for 20 years. Where everyone elses Freehold property is probably worth £180k after 20 years, your will be worth £110k because time is running out.

I wouldn't touch it with a barge pole. You are also liabnle for a ratio of mainteance costs, which aghain, are dictaed by the Freholder. So if he decided he wants a new £30,000 roof and you;re lease says you have to pay 1/12 thats £2500 you have to hand over without a great lot of warning, you cant say No and you dlont have a choice. You also could get unlucky and get a horrible Freeholder who charges everyone for thing that benefit themselves only, like retarmaccing their car parking pace or landscapong their garden. You can take it to court if you disagree, but its legthy, stressful and potentially expensive!

If I were you I'd back out now, the lenders have backed out for a good reason!! Its high risk!

Doozergirl

missk_ensington wrote:

When you bou a leasehold property, essentially you are renting it but paying your rent in huge lump sum for X am ount of years - in your case 65 years. When that runs out thje Freeholder has an obligation to allow you to renew as a protected tenant, but its debateable for how much and how long - there are all dictated by the terms of your lease.

The Freeholder could charge another 100k to double your lease length, and leasehold properties are the only ones which, generally speaking, decrease in value rather than increase because you may pay £100k for 100years and live there for 20 years. Where everyone elses Freehold property is probably worth £180k after 20 years, your will be worth £110k because time is running out..

This is completely irrelevant to the OP. The quesion is what to do about it now, not in 65 years time. This reads as scaremongering to me.

missk_ensington wrote:

You are also liabnle for a ratio of mainteance costs....

As anyone with share of freehold would be also.

missk_ensington wrote:

..which aghain, are dictaed by the Freholder. So if he decided he wants a new £30,000 roof and you;re lease says you have to pay 1/12 thats £2500 you have to hand over without a great lot of warning, you cant say No and you dlont have a choice.

Yes you do have a choice. Firstly, for about £100 each you have the option as a block to manage the property yourselves and therefore decide together on what needs doing and when and exclude the freeholder almost altogether. Otherwise, you are entitled to make observations on the work and the cost, obtain your own quotes which the freeholder must consider and give good reason for not using. They have to charge a fair price and if they don't, you can ask the Leasehold Valuation Tribunal to decide what is fair.

missk_ensington wrote:

If I were you I'd back out now, the lenders have backed out for a good reason!! Its high risk!

It isn't high risk if the OP addresses the situation by arranging a new lease :rolleyes: Millions of people live in leasehold properties and the law is such these days that they can easily escape the clutches of 'evil' freeholders that only tarmac their own parking spaces.

Ian_W

missey,
Ignore missk_ensington's post, it's absolute cobblers :rolleyes: ... and that's being kind and restrained - like what I am!!

missk_ensington_ wrote:

and leasehold properties are the only ones which, generally speaking, decrease in value rather than increase

Leasehold properties generally have the same value as freehold ones until the lease is allowed to get so short that they are difficult to mortgage, then - but only then - does their value start to decrease in comparison.

Leaseholders have statutory rights to extend, buy the freehold and self-manage these days and if you want to find out more go to https://www.lease-advice.org which is a government funded body which advises on these matters.

In your circumstances you need the seller to extend the lease before you buy and that will cost them money and take some time but leasehold is the norm for most flats - so if it's a flat you're after walking away from any that are leasehold means you'll have precious few to choose from. Freehold flats are as rare as rocking horse pooh and they have their own problems in terms of some lenders not being happy with them.