Leasehold term overestimated in valuation, landlord refusing extension until 60 years left

peadar

My son bought a flat over 2 years ago and has just discovered that the length of the remaining leasehold given in his building society's valuation and his mortgage agreement was incorrect. It said 95 years were left but in fact it was only 83 years. I assume this meant the value was overestimated - though I don't know by how much. 

It will dip below 80 years next year, and my understanding is that from that point it could become very difficult to sell at anything near a market price. The less time left on the lease, the less valuable it is. The MoneySavingExpert guide says: "There is a magic number of years when leases become MUCH pricier to extend. And that magic number is: 80". However, the landlord (a housing association) will not consider an extension until the lease has 60 years left. 

The building society seem to have initially guessed the lease duration with a proviso that the conveyancing solicitor should correct if necessary as it would affect the valuation. Whatever happened on the solicitor's side (if anything), no change occurred in the valuation and two days later the guessed duration had become part of the mortgage offer. The Leasehold Advisory Service says both that "the law gives the leaseholder (tenant) the right to extend their lease once they have owned it for two years", and "there are no rules and your landlord could refuse to extend your lease, or set whatever terms they like". Which I don't understand. 

What are his options? I know there is talk about reforming this area, but it isn't going to happen before his term drops below 80 years.

Tracet74

You need to have a surveyor carry out a lease extension valuation to calculate the premium for extending the lease.  A solicitor can then draw a Section 42 notice to be served on the freeholder.  They have to reply within 2 months or it's deemed as having been accepted.

user1977

peadar said:

The building society seem to have initially guessed the lease duration with a proviso that the conveyancing solicitor should correct if necessary as it would affect the valuation. Whatever happened on the solicitor's side (if anything), no change occurred in the valuation and two days later the guessed duration had become part of the mortgage offer.

Irrespective of what the solicitor told the lender, it was the solicitor's job to explain the terms of the lease to your son, not the building society's.

Is there a reason you're getting involved, as presumably your son has better knowledge of what actually happened?

nicmyles

After two years, he has the right to extend *however* I believe this may not apply with housing association properties, if the flat is being leased to your son as part of their charitable work.

If that's not the case and he does qualify, then there's a process to go through and back and forth but in the end if no agreement is reached a tribunal would decide what your son should pay to extend. Obviously there would be costs involved in getting to that result.

I should say what I'm sure you already know i.e. that it was your son's responsibility to look at the lease and confirm that he was happy with its terms before buying the flat. When I bought a leasehold flat, I read the entire lease and asked my solicitor for clarity on any unclear points. The lease should have had clear dates and timescales on it and, if it didn't, a query should have been raised.

MaryNB

peadar said:

My son bought a flat over 2 years ago and has just discovered that the length of the remaining leasehold given in his building society's valuation and his mortgage agreement was incorrect. It said 95 years were left but in fact it was only 83 years. I assume this meant the value was overestimated - though I don't know by how much. 

It will dip below 80 years next year, and my understanding is that from that point it could become very difficult to sell at anything near a market price. The less time left on the lease, the less valuable it is. The MoneySavingExpert guide says: "There is a magic number of years when leases become MUCH pricier to extend. And that magic number is: 80". However, the landlord (a housing association) will not consider an extension until the lease has 60 years left. 

The building society seem to have initially guessed the lease duration with a proviso that the conveyancing solicitor should correct if necessary as it would affect the valuation. Whatever happened on the solicitor's side (if anything), no change occurred in the valuation and two days later the guessed duration had become part of the mortgage offer. The Leasehold Advisory Service says both that "the law gives the leaseholder (tenant) the right to extend their lease once they have owned it for two years", and "there are no rules and your landlord could refuse to extend your lease, or set whatever terms they like". Which I don't understand. 

What are his options? I know there is talk about reforming this area, but it isn't going to happen before his term drops below 80 years.

The first part in quotation refers to the statutory route - cannot be refused once the leaseholder has lived there for 2 years, 90 year extension, ground rent goes to zero or peppercorn. There is some negotiation in the price but it based on a set of calculations and the freeholder cannot charge whatever they want. 
The second part in quotation marks refers to the non-statutory route - entirely at the discretion of the freeholder. Any length they want, any ground rent they want, any other changes they want, any price they want. 

He should have only relied on the title deeds not the mortgage agreement for the lease length.
The freeholder can refuse a non-statutory extension but cannot refuse a statutory extension. 
He should do it asap, before it gets to below 80 years. The process can take a while though so he may not have enough time. 

By the sounds of it his only option is the statutory route. Does he have the funds to do it? Use the following to get an idea of the cost https://www.lease-advice.org/calculator/

hazyjo

He should go down the statutory route.

These lot explain it more concisely than me:

https://www.lease-advice.org/article/lease-extension-of-leasehold-flats-the-two-routes/

london21

Your solicitor usually checks the years left on lease etc.

You are better extending earlier than later because as the years decrease gets more expensive.

You will have to go through the statutory lease extension.

 

https://www.lease-advice.org/article/12-good-rules-on-extending-your-lease/

 

Thrugelmir

peadar said:

My son bought a flat over 2 years ago and has just discovered that the length of the remaining leasehold given in his building society's valuation and his mortgage agreement was incorrect.

Your son's solicitor at the time of purchase would have checked and confirmed the term remaining on the lease. 

eddddy

peadar said:

 The Leasehold Advisory Service says both that "the law gives the leaseholder (tenant) the right to extend their lease once they have owned it for two years", and "there are no rules and your landlord could refuse to extend your lease, or set whatever terms they like". Which I don't understand. 

There are two ways to extend a lease - the "statutory route" or the "informal route". You've muddled them together.


This quote applies to the 'statutory route' : "the law gives the leaseholder (tenant) the right to extend their lease once they have owned it for two years"

This quote applies to the 'informal route' : "there are no rules and your landlord could refuse to extend your lease, or set whatever terms they like"