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Buyers want us to extend lease on freehold property. Is this really necessary?!

(24 Posts)
aufaniae Fri 05-Oct-12 14:20:10

I suspect this comes from the mortgage provider and is box-ticking.

We bought the freehold out on the flat some time ago. There are three flats in the property, we went through a process called "collective enfranchisement" and now the freehold is owned by a company we set up, each owner is a director of the company and owns their share of the freehold via the company.

I have just found out that the original lease still stands (I didn't realise this), and we are just a few months short of the 75 years the mortgage company (I assume it's them) finds acceptable.

However I think it's unfair that they're treating the property as if it's a standard leasehold property. If it was leasehold, it would cost thousands to extend the lease, and you'd have to involve the management company. In our case, it costs only solicitors fees, and you don't have to involve any external organisations.

Should they be demanding this from us?

It's come late into the sale and it a total surprise, the solicitors fees for it are the best part of £500 which I simply do not have. (This is a very difficult time for us financially. Just staying afloat is a struggle at the moment)

I don't know what to do.

If anyone else has any advice or has experienced similar I'd be very keen to hear from you smile

quietlysuggests Fri 05-Oct-12 14:21:48

Message withdrawn at poster's request.

bran Fri 05-Oct-12 14:25:41

Message withdrawn at poster's request.

aufaniae Fri 05-Oct-12 14:27:48

I spoke to a solicitor who would do it, and he said it was charged per flat.

Also I know at least on of the owners is also skint right now, I suspect the other one wouldn't care either way.

aufaniae Fri 05-Oct-12 14:28:53

Thanks for the replies smile

I'm annoyed it wasn't done when we bought the freehold, or at least brought to our attention sad

aufaniae Fri 05-Oct-12 14:31:25

Thanks, quietlysuggests, good idea smile

FishfingersAreOK Fri 05-Oct-12 14:43:12

I am in no ways a legal or property expert but I think there was something somewhere about this issue- something that you had to have owned the flat for 2 years before you could amend/extend the leasehold. May be totally wrong, but maybe it is one of those things to stop the buy the flat for x and leasehold for y and thus avoiding stamp duty thresholds. Hold on. Let me see if I can find the link. Not sure if any use to you.
Aha...nope probably not much good. [[ http://www.mumsnet.com/Talk/property/a1572703-Paying-seller-for-leasehold-extension-as-an-extra-to-stay-under-SD-threshold]] - Maybe pop your question at the end of this and see if you get some experts along.

Would you be able to ask the purchasers to apply to extend/cover costs instead of you?

aufaniae Fri 05-Oct-12 14:47:24

Thanks for the reply. I suspect we can't ask the buyers to cover the costs as the flat price is at the stamp duty threashold. If they give us any more money I suspect it'll be seen as upping the price, which will take their stamp duty from 1% to 3% so not really viable sad

I like your thinking though!

I hope there is a way round this ...

aufaniae Fri 05-Oct-12 14:51:40

Maybe there is a way of them doing something. I'm going to speak to the conveyancer again. I spoke to her yesterday and she gave me no advice at all. She was totally useless IMO.

DameFanny Fri 05-Oct-12 14:58:49

When we bought our current flat we queried the lease term as it was only 99 years. Turns out it was a mistake when the block was originally divided, and they took the opportunity to reissue the leases for all the flats at 999 years.

This was only about 7 years ago, so if the costs had been anything like what you're saying we'd have heard the shrieks from our last place!

Ask around again?

aufaniae Fri 05-Oct-12 15:01:46

I wish! grin

I've got a copy of the original lease, it's definitely 99 years (with 74 and a bit left in it).

iwantavuvezela Fri 05-Oct-12 15:06:22

When we sold our flat which had abut 89 years left we extended the leasehold. There are a few problems with selling a leasehold with what is seen as "running low"

Mortgage companies dont want to give mortgages

Also you can (legally) get an extension of the lease if you have been living in the place, but you need to have been living there for a few years (cant remember the exact number) so this would be hard for a new buyer.

It makes it easier to sell once you have a longer lease.

It cost us around £10.000 to do this and you have to pay the costs. You mgiht be able to factor these c osts into the sale ..... all of ours went through as we sold, so the leaseholder got their money as we sold if that makes sense!

I found this aspect of selling rather draining, although quite quick to sort out, it felt like something that had to be done, or else our property would be seen as less attractive. Once we advertised it with the "extended lease" we sold quickly.

Good luck

DameFanny Fri 05-Oct-12 15:06:41

Yes, ours was, but ask around for cost again? Its really simple paperwork as far as I can see, and shouldn't need to cost anywhere near that much

aufaniae Fri 05-Oct-12 15:20:51

iwantavuvezela can I ask, was yours a straightforward leasehold property?

Also, did you mean it cost you £10,000?

Ours is a share of freehold, so I'm baffled as to why this applies to us though.
Unless as you say the condition on living there a couple of years applies even though it's a share of freehold?

aufaniae Fri 05-Oct-12 16:20:44

OK, just spoke to these people who were great (took ages to get through, but hey, it's free legal advice, great!) Leasehold Advisory Service

They explained that it is applicable to us as I have two separate roles: the freeholder and the leaseholder. I may be selling my share of the freehold as part of the sale but that's not what concerns the mortgage lender, they're just interested in the lease.

Bum!

FWIW the 2 year thing only applies if you're dealing with a management company. The law says you have a right to extending the lease after owning for 2 years. That doesn't mean you can't do it earlier if the owner of the freehold agrees. (In this case, me and the other two owners).

SunnyUpNorth Fri 05-Oct-12 17:40:25

Hi there, I have very limited knowledge of the intricacies of this however I own a flat which has the same situation regarding the lease.

It is a house split into 3 flats and we all own share of freehold. But because we only have share of freehold rather than being the outright owner, we are also the leaseholder like you say.

So as far as I understand it you should be able to extend the lease for simply the legal cost of doing so as you wouldn't actually pay yourself as freeholder to allow yourself as leaseholder to extend it. Plus the two year thing shouldn't apply as again you would collectively be giving yourselves (ie all 3 flats) permission to extend.

If the the buyer is prepared to pay the legal fee for this, seeing as it is just a technicality with their mortgage company, then they should be able to Fi that outside of the purchase so it wouldn't affect purchase price or stamp duty.

If not then I would shop around various solicitors who will do it for all 3 flats for a more competitive price. Extending leases is very common in London, which I think from other threads is where you are?!! So you should be able to find someone decent.

If you do end up having to pay for it then I would try to sell it to your neighbours as something they would inevitably have to do should they sell. Plus I don't know if the freehold/lease is on the property itself or TW individual flats. If it is on the property then you wouldn't be able to extend on behalf of one and not the other I would think, and also means as far as solicitor is concerned it is one transaction rather than 3.

Good luck, so annoying when these time consuming things come up in the final stages.

aufaniae Fri 05-Oct-12 17:49:14

Thanks for the reply Sunny smile

I've spoken to the Lease Advice people and also two solicitors on the phone who - despite the fact I wasn't paying them - have each given me more helpful information in a matter of minutes than I've had in the two months since taking these solicitors on!

Apparently demanding to extend the lease is standard for mortgage providers as they are inly interested in the lease - the share of freehold is something I'm throwing in with the sale, but the mortgage provider doesn't actually care about that. The time they'll accept depends on the mortgage provider. Some go for 30 years + the length of the mortgage. Others 70 years as standard. It's unfortunate that the buyers' provider wants 75 years as we're only a few months below it!

I know the other owners won't be interested in doing this, but it is something we can do on one flat at a time, as each flat has its own lease.

manchurian Sat 06-Oct-12 13:07:09

aufaniae - if the cash problem a cash flow problem or a total cash problem? Could you reduce the price you sell it to your buyers by £500 and then make them pay the costs for this? That way they are not paying more, but you are not having to fork over £500 now...

aufaniae Sat 06-Oct-12 13:30:03

That's an idea, I wonder if it would work, let me ponder that one!

SunAtLast Sat 06-Oct-12 15:03:13

We had this from our buyers. Like you I thought share of freehold would be enough but they wanted extension of term

the other flats werent interested so we did it on our own as they were keen to buy. We paid just over £2k to do it but to us in the climate at the time it was worth it.

aufaniae Sat 06-Oct-12 16:18:25

Oh my goodness, how did it cost £2k?!

We were quoted about £500.

azazello Sat 06-Oct-12 16:25:13

We had exactly this situation on a flat we bought (so were in the same position as your buyers). Our main worry was that some of the flats had longer leases than others for some unknown reason and that the management co for the block would insist on payment above and beyond legal fees for extending the leases and although we would have a vote in that process, we could be outvoted.

We went ahead on reliance on a letter from the chairman and secretary of the Management co that the lease extension process would be started and we wouldn't be charged anything other than our own legal fees. It cost about £500 but took 2 years as the management co's solicitors kept messing around. Extended to 999 years in the end though.

aufaniae Sat 06-Oct-12 17:34:29

Oh dear again, we need it to take days! There's no management committee though, thankfully!

manchurian Sat 06-Oct-12 17:53:29

It will probably depend on the articles of association drawn up for the company you established and whether you need the other directors in order to extend your lease. If it's set up in such a way that you don't this may be why you were quoted the lower figure as it can be done more simply

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