Lease extension at sale time

oli_ro

Hi,

I am buying a flat which has quite a short lease term remaining (<60 years). There is a management company in which all the flats in the building have equal share, which owns the freehold and my understanding is that renewing the lease is a formality.

When I made the offer, the EA have agreed to, and confirmed for me recently as well, that the lease is being renewed to 999 years.

I assume that this is typically done before the exchange ? Mortgage application has been done as 999 years.

My solicitors are making inquiries about this with the sellers, but does anyone have experience with similar sales process ?

Thanks.

Update: Having read a bit more about different options available I think I am going to ask for the lease to be renewed before the exchange, its safer and cleaner as well from the lender's point of view.
Does anyone have any idea how long can this take in the case where the residents own the freehold ?

Dave_Ham

You need to speak with your solicitor, although it is virtually certain you will not be able to exchange until the lease has been extended.


These sorts of issues can get messy and protracted.


You need to deal with your solicitor and do not pay too much attention to the Estate Agent at this juncture.


Good luck

amnblog

Dave_Ham wrote: »

You need to deal with your solicitor and do not pay too much attention to the Estate Agent at this juncture.

If you only ever take one piece of advice in your life, this is it.

oli_ro

Thanks a lot, I will get advice from the solicitors.

oli_ro

I would appreciate it if someone can help me by clarify a few things. I am not asking for legal help as I have a solicitor who will guide me through the process, but I want to understand the process and the alternatives a bit better.



My situation: buying a leasehold flat where the freehold belongs to residents of the building in equal share. Most of the flats had their lease extended to 999 years, and my understanding that in such case extension is a formality.

The current lease on the flat is low (< 60 years). My understanding that there are 4 possible ways forward in such cases:

1. Buy with the current lease and extend after.

2. Ask the current owner to serve notice of intention to extend the lease and transfer that in my name to work around the 2 years constraint

3. “Lease extension on completion” A new longer lease is being arranged and this will be transferred in my name at completion.

4. Current owner extend the lease before exchange and all the contracts are done with the longer lease



The seller is proposing alternative 3. This is discussed between solicitors at this stage and be obviously check with the bank.

I am told this should be ok with the lender(Nationwide) as before the transaction, the newer lease comes into effect as per the contract drawn. Furthermore, Nationwide’s tenure criteria states that: “Where a new longer lease or lease extension is to be purchased the application will be processed using the details of the new/extended lease.”.



Is my understanding correct ?

Is it like to work ?

Is this procedure something that happens regularly ? I am told this is a well-known and used conveyancing process.

oli_ro

Can someone who has the permission move this thread to House Buying and Selling category, please ?

oli_ro

Hi,

I have completed 2 weeks ago on this flat and I thought about posting an update for the benefit of other people.
"
The procedure called informally "lease extension at completion" can be done. I am not a lawyer, so I cannot describe it in loads of details, but from what I understand:
- a new lease is drafted before exchange between the sellers solicitors and the solicitor for the freeholder, with the understanding is that it will be active before completion.
- the buyer solicitor reviews it and make sure all the agreements are in place
- the bank needs to approve the procedure. Very careful here, because as it was mentioned above, some banks insist that the application/valuation is done with the term of the current lease and if this is under 75Y(for example), they won't process your application, regardless.
- new lease is signed in buyers name at completion

This is just my interpretation, doesn't represent legal advice, get your own lawyer, etc...

I have seen on another website a more accurate description by Richard Webster(who regularly posts here), but I cannot link it.

Due to the complication with the bank having to be involved and extra work for all the sides involved, I would not go through this again.
The extra conveyancing fee for my solicitor was not huge, around 200GBP.

Hope it helps someone.

janthemum

Thanks for the update!
Very interesting.
Its always appreciated when people come back with an update/conclusion of original issue.
Glad it all got sorted.