Remortgage stalled due to insufficient time left on a 99 year lease - how to extend the lease?

ripofflondon

Hi all

This may well be thought of as more of a legal / land ownership issue than a mortgage one but, unless I am looking in the wrong place, there doesn't appear to be anywhere that quite fits it on MSE (unless anyone has any better ideas).

I am, or was till this AM, in the process of remortgaging my flat.  It is on the ground floor of a house that was split into 2 flats in 1988.  In the normal English way, each flat was sold on a 99 year lease and the upstairs leaseholder and me each continued paying £1/year ground rent to Mr X the freeholder (and owner of the house who'd split it into 2).  Then in about 2014/15, the upstairs leaseholder and me paid Mr X £20,000 for the freehold which we now own jointly, and since then we obviously haven't paid each other any ground rent.  

Now the prospective new mortgage lendor has picked up that my 99 year lease now has 'only' 63 years left to run and, predictably, they have said this is too short a time remaining.  

My question:  how do I extend my lease?  Obviously the upstairs leaseholder isn't going to object to this, any more than I would if they wanted to extend their own (which sooner or later they will no doubt look to do).  My instincts tell me that if I were to simply cross out the words '99 years' on my lease and replace it with '999 years' then the mortgage lendor would find some reason why this was unacceptable, but the idea of paying £000s in legal fees for a solicitor to do this goes against the grain a bit really!  

Anyone have any thoughts?

Mark

Mark_d

Interesting situation.  I wonder how many people here own the freehold to their leasehold property.

I would suggest going to a solicitor.  I'd be surprised if the cost exceeds £1000 as it's a small building with only two properties

JM68

Normally when leaseholders purchase the freehold they grant themselves very long (e.g. 999 year) new leases.  It would have avoided what is now a problem.

Assuming your other freeholder agrees then there is nothing to stop you doing so now.  However, a lease extension is a relatively complicated legal document (it will be a new lease, with various references to the previous one) and it will need to be correct to protect both of you now as well as not raise any complications with future sellers/buyers of the properties.  You may also want to use the opportunity to change or add to various terms in the old lease.

I agree with others that you should consider a solicitor doing this.  I imagine it would cost under £1500.

Another complication may be the registration of the new lease with the Land Registry.  Most mortgage companies will not lend until this is done and it currently takes up to 12 months in most cases.  There is a process to expedite but this is usually only applicable if a sale of a property would otherwise fall through.  Its possible your mortgage company would lend based only a copy of the new lease and confirmation it has been sent to the LR but you could check that without the new lease actually being completed so you know what to expect.

kingstreet

Despite this being caused by a mortgage lender, HBR&S is the better forum for leasehold enfranchisement. Although you wear two hats as freeholder and leaseholder you still need your lease to meet the usual lender requirements as you are now finding.

The alternative is to use a lender willing to accept the remaining 63 years. 

ripofflondon

Aha - thanks a lot, all. 

JM68 said:

Normally when leaseholders purchase the freehold they grant themselves very long (e.g. 999 year) new leases.  It would have avoided what is now a problem.

JM68 - this remark prompted me into trawling my emails. 

It transpires that, after the 2015 freehold purchase, the upstairs leaseholder wanted to remortgage in 2017 so went back to the (same) solicitors again and they then approached me asking if I wanted to join in with her in extending my lease too.  And guess what - the lease extension never happened because I got into an argument with these solicitors along the lines of them taking umbrage at me for having the temerity to ask 'why didn't you point out to us in 2015 that we should consider extending our leases while doing the freehold purchase as it would have been easier and cheaper to do both at the same time?!' 

JM68 said:

Another complication may be the registration of the new lease with the Land Registry.  Most mortgage companies will not lend until this is done and it currently takes up to 12 months in most cases.  There is a process to expedite but this is usually only applicable if a sale of a property would otherwise fall through.  Its possible your mortgage company would lend based only a copy of the new lease and confirmation it has been sent to the LR but you could check that without the new lease actually being completed so you know what to expect.

Again thanks for pointing out.  The mortgage broker reckons some lendors will be OK with proof that the lease extension has been done plus a Solicitors' Undertaking that it's been lodged in the queue at the LR.  

Kingstreet - the mortgage broker said anything less than 75 years was a no-no for most lendors.  But - I have reposted in HBR&S (had to work out what that one stood for!) 

Lastly - can anyone recommend a good firm of sols for the lease extension?  It DOES appear from my emails with the previous sols that it's not just a case of swapping 99 years for 999 !