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    • chucknorris
    • By chucknorris 8th Jan 20, 11:38 AM
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    chucknorris
    Private loan friend to friend to pay for a lease extension
    • #1
    • 8th Jan 20, 11:38 AM
    Private loan friend to friend to pay for a lease extension 8th Jan 20 at 11:38 AM
    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?
    Last edited by chucknorris; 08-01-2020 at 11:41 AM.
    Chuck Norris can kill two stones with one bird
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Page 5
    • JimmyTheWig
    • By JimmyTheWig 15th Jan 20, 4:10 PM
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    JimmyTheWig
    I would then have to share all the sale fees etc. I would rather stick with what I intend to do. I am very comfortable with having the first charge on the property, I am happy to proceed under those circumstances.
    Originally posted by chucknorris
    Fair enough.
    • Lungboy
    • By Lungboy 15th Jan 20, 4:52 PM
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    Lungboy
    It is possible. but can get complicated (on the timing of things), the simplest way to do it is extend the lease first, then sell.
    Originally posted by chucknorris
    Simplest for who? Not you, you need to get a charge put against the property and get the contracts sorted.
    • chucknorris
    • By chucknorris 15th Jan 20, 5:43 PM
    • 10,294 Posts
    • 15,176 Thanks
    chucknorris
    Simplest for who? Not you, you need to get a charge put against the property and get the contracts sorted.
    Originally posted by Lungboy
    It isn't too much trouble. I am a chartered quantity surveyor and I'm quite familiar with contracts.

    I'm helping a friend, so a bit of effort is OK with me.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    I've started running again, after several injuries had forced me to stop
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