Simultaneous lease extension and sale - buyer's mortgage due to expire

Jenwahh

I am currently at what I thought was the final stages before exchange of a simultaneous sale and lease extension of a leasehold flat. But there is one hold up - the freeholder/landlord has not yet signed and returned the new lease. I signed it and returned it on 8th September, and then it was forwarded to him. He has been on holiday, I believe, but has been back for some 10 days now. His solicitor tried to chase him up on 3rd October and again on 12th and has not been able to contact him. I have tried leaving a voicemail and an email but previous communications with him have demonstrated that he typically leaves at least 5 days before responding. The buyer's mortgage offer runs out at the end of the month and of course we cannot exchange contracts without confirmation that the landlord's solicitor has the lease contract. Apparently the buyer is not able to have his mortgage offer extended or find a similar product and so if we cannot get hold of the lease on time then I guess that's it. I'm devastated at that prospect due to the knock on implications for my family. Has anyone ever been in a similar situation and had it work out? Or does anyone have any advice?

eddddy

Do you have a good EA who is progressing the sale and in contact with the freeholder?

Is the freeholder aware that there is an end of month deadline for completion? And if that deadline is missed, the freeholder won't get the premium?

And if that happens, perhaps suggest that you would then go for a statutory lease extension, which would probably mean that the premium that the freeholder gets is less.

Also, I guess this could also be a game of 'chicken' - the freeholder holds out until the last moment until you become desperate. Then they ask for more money.

That's why it might be a good idea to have a good EA managing the communication/negotiation process.

economic

Perhaps a better idea is to pass on the right to the lease extension to the buyer to do after the sale is complete and reduce the purchase price by the amount of the cost of lease extension. This can be done easily as long as the buyer agrees.

I’m afraid the freeholder legally doesn’t have to do anything unless you go statutory but by then the buyer would be long gone.

Tom99

economic wrote: »

Perhaps a better idea is to pass on the right to the lease extension to the buyer to do after the sale is complete and reduce the purchase price by the amount of the cost of lease extension. This can be done easily as long as the buyer agrees.

I’m afraid the freeholder legally doesn’t have to do anything unless you go statutory but by then the buyer would be long gone.

That is a good idea and may be your only way forward, however your purchaser will be taking on the risk of the freeholder pulling out of the deal. It may be they are so keen with the mortgage offer running out that they will accept the risk without wanting a further discount from you other than the lease extension price.

economic

Tom99 wrote: »

That is a good idea and may be your only way forward, however your purchaser will be taking on the risk of the freeholder pulling out of the deal. It may be they are so keen with the mortgage offer running out that they will accept the risk without wanting a further discount from you other than the lease extension price.

a statutory lease extension will force the freeholder to extend. so the purchaser is covered.

it depends if the buyer is willing (and it maybe that he needs to be educated about lease extensions) and if he actually can (as existing lease maybe too short for mortgage so needs to be extended before purchase by the seller).

yes the wonderful world of leasehold, where you really are held at a mercy to the freeholder!

eddddy

economic wrote: »

Perhaps a better idea is to pass on the right to the lease extension to the buyer to do after the sale is complete and reduce the purchase price by the amount of the cost of lease extension.

I think you might be confusing a statutory lease extension with an informal lease extension.

I suspect the OP is talking about an informal lease extension. There is no right to an informal lease extension - so nothing to pass on.

Also, if the mortgage lender requires an extended lease - even passing on the statutory right won't help.

economic

eddddy wrote: »

I think you might be confusing a statutory lease extension with an informal lease extension.

I suspect the OP is talking about an informal lease extension. There is no right to an informal lease extension - so nothing to pass on.

Also, if the mortgage lender requires an extended lease - even passing on the statutory right won't help.

passing on the right to lease extension is done by serving section 42 notice by the seller prior to the sale. this is statutory. then the new buyer deals with the rest including payment. all the seller does is serve notice (which the solicitor actually does).

Tom99

economic wrote: »

passing on the right to lease extension is done by serving section 42 notice by the seller prior to the sale. this is statutory. then the new buyer deals with the rest including payment. all the seller does is serve notice (which the solicitor actually does).

[FONT=Verdana, sans-serif]Yes you are right, that option would guarantee the purchaser a lease extension but they would still be at risk of an unknown price or the freeholder pulling out of the current agreed deal. They may be prepared to accept that risk.[/FONT]

economic

Tom99 wrote: »

[FONT=Verdana, sans-serif]Yes you are right, that option would guarantee the purchaser a lease extension but they would still be at risk of an unknown price or the freeholder pulling out of the current agreed deal. They may be prepared to accept that risk.[/FONT]

well a price will eventually be agreed between both sides valuers. the lease extension will have to be done no matter what. the only variable is time and cost (paying legals, valuers etc). the cost of lease extension would normally be agreed around market price.

Jenwahh

I should have clarified earlier that it is indeed an informal lease extension as this had seemed to me at the time to be the quickest route, and given that I signed the new lease some 5 weeks ago I hadn't thought this would be the thing that would hold us up or even potentially cost us the sale. I am not sure that I could serve a section 42 and pass the benefit to the buyer as he doesn't have the money to undertake it, which is why he put in an offer when I said I was willing to pay for the lease extension myself. Sadly as the current lease is only at 70 years, the buyer needs the extension in order to secure his mortgage.
My solicitor only became aware two days ago that the freeholder still hasn't returned the contract. Even if I lost this buyer, I will still need to complete on the lease extension as no one is going to buy with a 70 year lease.I just don't know how to get a hold of the freeholder. The EA and his own solicitor have also been trying. I was going to try calling the management company tomorrow and see if they can shed any light. I sincerely hope it's not a game of chicken and he's going to ask for more as I have already paid 18.5k !!! Which is sitting in my solicitor's account ready to go to him. He isn't aware as yet of the timescale, but if I can get through to anyone tomorrow I will explain. I just hope I can get through and that he is human enough to proceed...

eddddy

Jenwahh wrote: »

He isn't aware as yet of the timescale, but if I can get through to anyone tomorrow I will explain. I just hope I can get through and that he is human enough to proceed...

As I say, approach the discussion carefully.

If you sound desperate, the freeholder may feel that you'd be prepared to pay more.

A better angle might be... if you don't hurry up and sign the contract, the buyer will have to back out and you won't get anything.