How long does it take to grant share of freehold / extend lease?

JK4158

Hi we are thinking of purchasing a flat which has lower than 70years lease (currently a leasehold)
The vendor said they are going to start working with a solicitor to split/grant a share of freehold (for all 3 flats in the building) from January, and upon completion a new owner will be able to get a share of freehold and lease extended to over 100+

We have a mortgage expiring in March so we will have about 3months to complete any sale and do not want to take any risk. Also not sure if the bank will approve mortgage on the current lease (can it be conditional upon the lease being extended?)

 the EA says it will only take about 5 weeks or so for the whole thing, but when I googled it says it takes min 2mths to extend a lease (is it different for a share of freehold)?

Anyone has experience with this kind of situation and how long it took to get a split of the freehold?

propertyrental

There are two separate processes.
1) setting up the share of freehold. Who is the current owner? Will the other two flat owners cooperate? How long will the 4 solicitors (current freeholder's + each leaseholder) take? How long will it take for each leaseholder's mortgage lender to agree?
'Piece of string'.....

2) lease extension. Will this be done in parallel ie by the current freeholder, or subsequently (ie by the 3 new joint freeholders) to 1) above. Will the other 2 leases be extended too, and what impact might that (and their mortgage lenders) have on timescales?

eddddy

This might (or might not) be a complex issue. It depends on a lot of things, for example...

What process are the leaseholders using to buy the freehold?...

• Collective enfranchisement
• Right of First refusal
• Informal negotiation (if so, did the freeholder approach the leaseholders, or vice versa?)

The time the process takes, and the probability of success, would vary depending on each option. (None of them are 100% certain.)

You definitely need to find out if your mortgage lender will accept a 70 year lease on completion. If they won't, it reduces your options (it might even make buying this flat impossible).

And/or are you waiting for the freehold purchase and lease extensions to be completed before you exchange contracts? If so, has the seller got the cash they need to  pay for their share of the freehold?

JK4158

So according to the agent, there are three leaseholders in the building with one freeholder who has agreed to split the freehold and grant a share of freehold to each leaseholder. They are collectively using one solicitor to do this, they are all ready to start the work from January and agent is saying it will only take about 5 weeks or so.
If the mortgage lender will not accept under 70years lease, can the mortgage be conditional to having a share of freehold upon completion in March or is this too risky a scenario for us?? The agent makes it sound like it’s very simple

JK4158

The other two leaseholders are already living there and we are trying to buy the third flat
they are going to split share of freehold and extend the lease at the same time (extending to 150 years for each flat i think)

eddddy

JK4158 said:

So according to the agent, there are three leaseholders in the building with one freeholder who has agreed to split the freehold and grant a share of freehold to each leaseholder.

That's a bad description of what's happening. 

A better description would be... 

• The freeholder is selling a freehold building (which contains 3 leasehold flats).  The 3 leaseholders are clubbing together to jointly buy the freehold building.

• Let's say the freehold building is costing £30k, maybe each leaseholder would put £10k towards it (or they might each put different amounts).

• So 3 of you will jointly own a freehold building - so you'll probably have to work as a team to do stuff like arrange buildings insurance, arrange maintenance, arrange repairs, etc. 

• As a team, the 3 of you can also agree to extend leases. But this might get complicated (and cause arguments) if the 3 leases are currently different lengths.

If everyone is 100% in agreement about everything, and everyone is 100% motivated to make it happen, the freehold purchase could be easily tied up within 5 weeks.

But there are loads and loads of things that could go wrong - which might cause delays, or might mean it doesn't happen.


In your position, I think I would take the view "It would be great if it all comes together, but I need to think about a backup plan, in case it all falls apart."

propertyrental

JK4158 said:

So according to the agent, there are three leaseholders in the building with one freeholder who has agreed to split the freehold and grant a share of freehold to each leaseholder.

Not clear if the current freeholder is one of the3 leaseholders, or is a 4th person/company.

Also not clear what the cost of the share of freehold will cost each leaseholder.

They are collectively using one solicitor to do this,

who is 'they'? The 3 leaseholders? And /or the freeholder? If all 4 there's a clear conflict of interest.

What exactly is being offered to sell and at what agreed price? 

* The 70 year lease? 

* a 150 year lease? 

* a 70 year lease plus share of freehold?

* a 150 year lease plus share of freehold?

genericn17

I bought a flat where the owner was extending the lease, which was down to about 70 years. The mortgage company wouldn't let it complete until it was all registered with the land registry - which took *9 months* from it being submitted to them. They are supposed to be able to expedite if it's holding up a house sale but this never actually seemed to happen in practice. 

Jonboy_1984

We had a lease extension expedited in March, took two weeks but that was after everything else was settled. Another flat above ours apparently applied for it a few weeks later, only to discover the land registry had rejected their paperwork which needed correction and then refiling.

I personally would carry on looking in the meantime, as no one else in the lease transaction will have the same urgency you do and so less incentive to push through.

JM68

In my experience estate agents talk nonsense about lease extensions and buying the freehold.  IF it could be done quickly and easily the vendor would wait a short while and market the property as share of freehold with a long lease, which would command a much higher value than one with a lease under 80 years, which would require you to pay 'marriage value' upon extending, on top of all the other associated costs and professional fees.  If you can not buy at a price that reflects the current short lease (and/or you can't get a mortgage on the current lease length) I think your best bet is to assume there is no chance this particular property will be proceedable for you and you should start looking at others very quickly, as completing before March will still be a challenge on a straightforward long lease property (though your mortgage company might extend the offer deadline if you are close to completion).