Leasehold woes!

Palm_juha20

Hi,
Apologies if this has already been discussed but I have done a search and can't see it anywhere.
I'm hoping someone can share, if they have had a similar experience.
I am trying to sell my leasehold property which has just under 103 years left.  A sale recently fell through with the sellers solicitor saying that there is a clause in my lease allowing the freeholder to increase the service charge (currently at £250/annum) once it reaches 100 years.  Apparently this meant my sellers were unable to get a mortgage as lenders don't like the service charge going over £250/annum.
My solicitor advised looking into a lease extension which has been quoted at over £14k plus costs by the freeholder.  This is completely prohibitive for me.
So, my question is, does anyone else have a similar experience and is there anything I can do to sell this flat?
Thank you

Schwarzwald

you likely mean ground rent, not service charge, two v different charges

RHemmings

How much is the flat worth? Is extending the lease and zeroing ground rent a proportionally small cost, or a proportionally large cost? I note that you can't afford it. 

Your property will likely sell at auction to a cash buyer - all else being OK. But, such a buyer will be looking for a bargain. So, the price will likely be less than market value minus £14k (plus costs). 

The freeholder may have quoted £14k plus costs, but I guess that would be for an informal lease extension. It would be worthwhile getting an estimate for a statutory lease extension to see how much that will cost. I would suggest that you (OP) read up here to learn more about lease extensions. https://www.lease-advice.org/topics/?topic=lease-extension

It is possible to sell a property having started the lease extension process, with the buyer then going on to complete the process. This can be done with you funding the extension out of the proceeds of the sale. Or with the buyer paying for the lease extension. In the second case you will most likely get less for the flat.   This page explains the process. The scenario here is where there isn't enough time to complete the lease extension process before sale, but I think the general information is still relevant to you (OP). https://www.bradysolicitors.com/brady-blog/can-i-sell-my-flat-with-a-short-lease/

eddddy

Palm_juha20 said:

Apparently this meant my sellers were unable to get a mortgage as lenders don't like the service charge ground rent going over £250/annum.

Many/most mortgage lenders say they will allow ground rents over £250, if the buyer takes out indemnity insurance.

So it might be the buyer's decision not to proceed, rather than the mortgage lender's decision.

RHemmings said:

It is possible to sell a property having started the lease extension process, with the buyer then going on to complete the process. 

But if the mortgage lender genuinely won't accept ground rents over £250, this won't be an acceptable solution to the mortgage lender.

As there is no guarantee that the buyer will complete the lease extension process.

RHemmings

eddddy said:

Palm_juha20 said:

Apparently this meant my sellers were unable to get a mortgage as lenders don't like the service charge ground rent going over £250/annum.

Many/most mortgage lenders say they will allow ground rents over £250, if the buyer takes out indemnity insurance.

So it might be the buyer's decision not to proceed, rather than the mortgage lender's decision.

RHemmings said:

It is possible to sell a property having started the lease extension process, with the buyer then going on to complete the process. 

But if the mortgage lender genuinely won't accept ground rents over £250, this won't be an acceptable solution to the mortgage lender.

As there is no guarantee that the buyer will complete the lease extension process.

Yes, true. But I was going through all the options. While many lenders won't accept a ground rent of over £250pa (or more in London), some will. I've heard that the Coventry Building Society will lend on properties with higher ground rents, though it's still going to make it much more difficult to get a mortgage. Apparently some lenders will accept an indemnity policy. However, while the property may be technically mortgageable, as you point out, individual buyers are likely to be put off if their mortgage lender(s) of choice refuse to lend. 

Another alternative is to negotiate with the freeholder for a deed of variation changing the terms of the ground rent. A property I'm looking at now has had its ground rent terms modified by a deed of variation to remove a future ground rent increase. (The lease had a fixed number of increases on fixed years of the lease.) The freeholder would expect payment for that. But, it may be cheaper than a lease extension.