A friend of mine owns a leasehold flat which is an investment property, she has allowed the lease to drop to 40 years. She wants to sell the property, but obviously it is seriously blighted by only having 40 years left on the lease. She is married, and they are both currently unemployed, so a mortgage extension is probably not a solution due to their status. An old quote from the freeholder (now expired) leads them to believe that the lease extension would now be about £70k, if so, the equity in the property would be about £160k net (after paying for the leasehold extension, the mortgage, CGT and miscellaneous costs). So there is plenty equity.

I have already loaned them £5k over 2 years ago, which was to try and sort this out so that they could sell, but they decided not to sell, so they still owe me that. They have asked me for advice, the best value solution that I can see for them is if I lend them another £80k (ish) to cover the lease extension, the freeholder's costs, their solicitor, my solicitor for securing a charge on the property and some cash to cover their loss of rental income during the sale (they would need this).

I would rather not be involved, but I think I am their only way out of their problem, so I am willing to do this. But what I would like from them is:

1. A written agreement acknowledging:
The fact that it is a loan (not a gift)

A stated specific interest percentage to me (yet to be agreed, but it would only cover my opportunity cost).

Acknowledgement that they agree to sell the property as soon as reasonably possible. With a time limit that would give me to recover the loan by forcing a sale (probably about 12 to 18 months).

2. Agreement that a charge is placed on the property for the loan (including the initial £5k too).

I just wondered if anyone can spot something that I might have missed, or has any other comments?