Separate lease on parking space

ang_harvey

Help!

I was due to exchange on a flat this week but my conveyancer is not allowing it to happen (protecting mine and the lenders interests). I'd like a second opinion (if I can explain the situation well enough...).

I'm supposed to be buying a flat which is share of freehold with 999yrs on the lease. It is managed by a residents association with 6 directors.

The flat comes with a parking space which is still owned by the original company - Sinclair Gardens Ltd. The lease on the parking space only has 61yrs left on it. The lender hasn't got an issue with this and is happy to proceed.

The conveyancer says it's not acceptable and there needs to be a deed of variation to bring the lease term of the parking space in line with the flat lease. The seller has already said no to extending the lease.

My conveyancer is saying it's too risky as the management company could ask for thousands of pounds to extend the lease and I would have no control. Is this right? I thought there was a specific calculation. They are saying these issues should've been flagged up when the seller bought the flat herself 2yrs ago but she was a cash buyer so probably didn't worry about it.

My questions:

1) Is there really a problem with a parking space being owned by a different company and only having a 61yr lease? (the flat has a long lease)
2) is my conveyancer right that the management company of the parking space can charge me whatever they want for extending or maintaining the space? The lease asks for £40 a year ground rent going up by £15 every 25yrs. That seems fine to me.
3) Can the lease on the parking space be extended on it's own without the flat?
4) My conveyancer is asking for a lease information pack on the parking space - is this usual practise? I've seen the lease document so am not sure what an information pack would provide. The seller's solicitor is saying no in any case.

At first I took my conveyancer at face value as he seemed to know what he was talking about but then I started wondering - there are 20 other flats with the same parking space issue - five of them sold in 2014/2015 - they couldn't all have been cash buyers surely.

Any advice would be greatly welcomed as I would actually like to buy this property (if I can do so without similar problems when I come to sell the place).

Thanks!!

G_M

I'm not an expert on leases (as your solicitor is) but will have a go:

ang_harvey wrote: »

My questions:

1) Is there really a problem with a parking space being owned by a different company and only having a 61yr lease? (the flat has a long lease)
No probem being owned by a different company
Yes the short lease means that if you live 61 years, you'll lose you parrking space. Or if you die, the Beneficiaries of your will will lose it. Or if you sell, your buyers will lose it (so may decide nott to buy!).
2) is my conveyancer right that the management company of the parking space can charge me whatever they want for extending or maintaining the space? The lease asks for £40 a year ground rent going up by £15 every 25yrs. That seems fine to me.
I believe so. I think the legal protection against this applies to residential leases which this is not. I may be wrong though.
3) Can the lease on the parking space be extended on it's own without the flat? Yes of course.
4) My conveyancer is asking for a lease information pack on the parking space - is this usual practise? I've seen the lease document so am not sure what an information pack would provide. The seller's solicitor is saying no in any case.
I assume it would include details on whether the ground rent has been paid up to date etc. Insurance etc.

At first I took my conveyancer at face value as he seemed to know what he was talking about but then I started wondering - there are 20 other flats with the same parking space issue - five of them sold in 2014/2015 - they couldn't all have been cash buyers surely.
Obviously the risk is limited to the parking space only, so many buyers may consider this unimportant (comparred to the flat itself). This is confirmed by the fact your mortgage lenderr has raised no objection.
but your solicior is being cautious and raising a relevant issue.

If he did not, and an issue arose later (eg when you sell) you would be posting here asking "Can I blame my solicitor? He never warned me.......!)

edit:
the right to a new lease is covered by the Leasehold Reform, Housing and Urban Development Act 1993 which applies to the "tenant of a flat", and hence not to the tenant of a parking place (note: 'tenant' here = leaseholder).

So extension of the lease would be a matter of negotiation.

steampowered

Your conveyancer is of course correct that the management could charge you for extending the lease.

I can't see any logical reason why the duration of the lease on the flat and the lease on the parking space would need to be the same.

More logical for the space to go together with the flat, but not essential.

You can tell your conveyancer you understand and accept the risk of an extension being required to the parking space lease and that this may cost, or that the lease to the space may expire completely in 61 years time, and instruct them to go ahead.

Your conveyancer will still need to comply with the instructions of your mortgage lender, though.

davidmcn

ang_harvey wrote: »

The lease on the parking space only has 61yrs left on it. The lender hasn't got an issue with this and is happy to proceed.

If you're sure about this (how?), then you and your lender can tell your conveyancer just to get on with it.

However, is it possibly the case that your conveyancer is advising your lender they shouldn't proceed, and that they're going to pay attention to what he says?

eddddy

ang_harvey wrote: »

1) Is there really a problem with a parking space being owned by a different company and only having a 61yr lease? (the flat has a long lease)

As it stands, the flat will have no parking space in 61 years time. I assume that the flat will be worth less with no parking place.

As the flat gets nearer to the 61 year mark, the impact on the flat's value will get greater and greater.

ang_harvey wrote: »

2) is my conveyancer right that the management company of the parking space can charge me whatever they want for extending or maintaining the space? The lease asks for £40 a year ground rent going up by £15 every 25yrs. That seems fine to me.

Yes - they can charge whatever they want for a lease extension. There are no laws or regulations to limit what they ask you to pay.

They can also refuse to give you a lease extension (e.g. because they think they can sell it to somebody else for more in 61 years time, or they want to build some new flats on the parking area in 61 years time).

ang_harvey wrote: »

3) Can the lease on the parking space be extended on it's own without the flat?

Yes - if you and the freeholder can reach agreement on price/terms.

ang_harvey wrote: »

4) My conveyancer is asking for a lease information pack on the parking space - is this usual practise? I've seen the lease document so am not sure what an information pack would provide. The seller's solicitor is saying no in any case.

As well as ground rent details, this should tell you about things like past and planned maintenance costs.

e.g. There could be a plan to resurface the parking spaces in a few months, with each leaseholder having to pay £10k towards it.

eddddy

Just to add...

ang_harvey wrote: »

The lease on the parking space only has 61yrs left on it. The lender hasn't got an issue with this and is happy to proceed.

Are you sure about this?

The lender's valuer will not have read the lease, and may not have been told that there is only 61 years left on the parking space lease.

So RICS valuers make the assumption that there is at least 85 years left on any lease, and value the property on that basis.

The conveyancer is required to inform the lender if a lease is less than 85 years, so that the valuation can be adjusted.

ang_harvey

Thank you for your reply,

Yes the lender is aware of the 61yr lease and they completed a new valuation when they found out. My financial advisor has also confirmed to me that they are happy to proceed (they've sent me a new mortgage deed following all this coming out).

ang_harvey

As well as ground rent details, this should tell you about things like past and planned maintenance costs.

e.g. There could be a plan to resurface the parking spaces in a few months, with each leaseholder having to pay £10k towards it.[/QUOTE]


Interesting point about resurfacing, thank you! I couldn't think what could possibly be in the lease pack. That's very helpful.

stator

Your mortgage lender has decided that by the time your mortgage is paid off, the flat will still be saleable for the amount they are lending you.
This doesn't mean it's a good investment for you, just that they think it is safe for them.
So they probably worked out how much the flat would be worth without the parking space and decided they would still give you a mortgage.
You have to think longer term. If you might want to sell the flat in the long term you have to accept the risk that you might lose the value of the parking space.
You could ask estate agents how much it would currently be worth without a parking space so that you know the maximum amount of value you might lose.

After the lease does expire, it is very likely the owner of the flat will have to pay a lot of money for a new lease. Since there is no legal protection they will squeeze as much money as they can

ang_harvey

Thank you all for your advice, it's really helpful.

I had a chat with a second solicitor today and he said the same as the conveyancer. He gave me two choices - try and buy the flat without the parking space (which is fine with me as the parking space is a long way from the actual flat and there is on-street parking which is closer). The seller's solicitor has said they can't be split but todays one says he thinks it can. Second option is to get seller to extend the lease (which she said no to before).

I think the issue is that the freeholder of the parking space is Sinclair Gardens Ltd and they have a reputation for being very slow so the seller is trying to bypass having to do anything that relies on them getting something done.