lease extension at completion - will a lender commit?

500pages

We've found the flat we want. The complication is that the vendor has said they are in the process of extending the lease at the moment and I'm told by the EA that the extension will take place at completion. I'm guessing this is because the vendor doesn't have the capital to do the extension otherwise(?).

I am guessing this may be a problem for some lenders - either in principle or because the valuation will be a bit off based on the current length of the lease (I don't actually know what it is but I assume it's under 80 years).

Does anyone know what the story is likely to be with this from a lender's POV?

kingstreet

They will base lending decision on current lease term, not what it may be later.

You need to find out what is remaining and ensure your lender will be happy with it.

Kapaxiana

We are going through something similar. Although I was mi-sold the property as share of freehold and only found out on wednesday that there is only 69 years left on the lease. My solicitor has asked the seller whether she will be extending the lease but we haven't heard back yet. I contacted my broker and she said usually the lenders need 25 years remaining lease after the mortgage is paid off. Our mortgage is for 25 years so that take us to 50 years. I hope my broker is right and also anxious to hear back from 1)the bank and 2) the seller!

kingstreet

Even though you may be purchasing a share of the freehold, or a share in a company which owns the freehold, the property remains leasehold, so you would need to;-

find a lender willing to accept the residual lease term and increase it later
or
have the vendor increase the lease term prior to your purchase.

Here's a copy of the CML Handbook on lender acceptable lease terms;-

http://www.cml.org.uk/cml/handbook/englandandwales/question-list/321