Need to extend lease before sale of btl - bridging loan or mortgage on home

mr_auspicious

Im selling my buy to let, it has 87 years left on the lease.  Every estate agent I have spoken to has told me I should start the process of extending it with the local authority (the freeholder) so either I can sell and transfer the application and the amount it will cost known, or the lease will be extended.  It will make the sale easier and help with finding a buyer 

I’ve been told that the local authority who owns the freehold  will accept payment for the extension on completion of the sale but that doesn’t allow for the costs and legal fees which I don’t have the cash for 

I understand a bridging loan is an option, but an expensive one.  I own my home without a mortgage, would it be possible to take out a small mortgage against it that I would repay on the sale of the btl?  Or even repay the mortgage by adding to the btl mortgage when I refix later in the year if I decide not to sell 


thanks in advance for any help 

eddddy

mr_auspicious said:

Im selling my buy to let, it has 87 years left on the lease.  Every estate agent I have spoken to has told me I should start the process of extending it with the local authority (the freeholder) so either I can sell and transfer the application and the amount it will cost known...

The law changed on 31st January 2025 - so that advice isn't really valid any more.


Before Jan 31st,  the advice would have been:

• You have to own a flat for 2 years before you can do a statutory lease extension

• So you start the lease extension process between exchange and completion (because you've owned the flat for over 2 years) - then the buyer takes over the process after completion.

After 31st Jan

• You don't have to own the flat for 2 years to do a statutory lease extension

• So the buyer can start the lease extension process on the first day that they own the flat (so it's pointless you starting the process before completion)

See: https://www.lease-advice.org/news-item/leasehold-reform-abolition-of-the-two-year-rule/



And more generally, I'm not sure that I agree with the estate agent, because..

- Let's say flats like yours are worth £250k with an extended lease
-  And lets say a lease extension would cost £10k + £4k in fees


So the estate agent says to buyers "You're getting a flat that's potentially worth £250k for £236k" - and you have 2 options:

• Option 1) You can pay £236k now, and if you have a spare £14k - you can extend the lease immediately

• Option 2) Or you can pay £236k now, and take up to 7 years to save up £14k for a lease extension

Option 2 would be great for a buyer on a limited budget who can only afford £236k today, but is confident they can save up £14k in the coming years.

Bookworm225

eddddy said:

- Let's say flats like yours are worth £250k with an extended lease
-  And lets say a lease extension would cost £10k + £4k in fees

So the estate agent says to buyers "You're getting a flat that's potentially worth £250k for £236k" - and you have 2 options:

• Option 1) You can pay £236k now, and if you have a spare £14k - you can extend the lease immediately

• Option 2) Or you can pay £236k now, and take up to 7 years to save up £14k for a lease extension

Option 2 would be great for a buyer on a limited budget who can only afford £236k today, but is confident they can save up £14k in the coming years.

You are assuming that the buyer can get a mortgage to buy a flat which has a "short" lease in the first place

eddddy

Bookworm225 said:

You are assuming that the buyer can get a mortgage to buy a flat which has a "short" lease in the first place

I'm not aware of any mortgage lender who will not lend on an 87 year lease.

Here's what the mortgage lenders say: 
https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1846/



But if you're correct, and the flat is would be difficult to mortgage with an 87 year lease, the estate agent's advice is shockingly bad - or even negligent:

mr_auspicious said:

Every estate agent I have spoken to has told me I should start the process of extending it with the local authority (the freeholder) so either I can sell and transfer the application ...

If a mortgage lender won't accept an 87 year lease, they won't accept an 87 year lease with an extension application in progress.

(So the sale would fall through, the OP would have to abort the lease extension application, and potentially owe thousands in fees.)

loubel

I would agree. Price it to take into account that the buyer will want to extend the lease in the next few years. Some might be put off if they don't want to have the hassle of doing so. But if the price is right it should still find a buyer.

m0bov

87 is not short, it's perfectly fine. It's only once you dip below 72 years it gets more expensive.

mr_auspicious

Thanks for everyone’s help 

I spoke to a soilicitor who told me the change in law has made it much less of a problem, she even suggested it wouldnt be a wise move to start the process