Putting a leasehold property into joint names(36 Posts)
Our maisonette DH’s name (there is a good reason for this). I’m about to inherit enough money to pay off the mortgage and we will obviously then want to put it into both names. The problem is it’s leasehold and I’ve read that we may need to get the freeholder’s permission to do this. Does anyone know if this is true?
I’m worried we’ll run into problems as the freeholder can be a bit funny about things, and we have a short lease (58 years) that we can’t afford to extend at the moment and pay off the mortgage and the mortgage is the priority. Can he say we can’t make any changes without extending the lease first?
Thanks in advance
You'll need to read the lease and look for the "alienation" clause. If there aren't any clause headings, it's likely to start off a bit like "not to assign, underlet, transfer....." and go on like that. You might need consent, you might need a deed of covenant or you might just need to serve a notice afterwards. There will also need to be a transfer which will need to be registered at the Land Registry.
BUT if you have a short lease (which you do), you would be much better off spending the money on a lease extension. You'd need to take advice but basically the cost of getting an extension will increase every year so it's better not to wait. Look at the lease advice website. HTH.
Seriously - ^extend the lease^: 57 years is very short (I'm surprised you were able to get a mortgage, most lenders baulk at less than 80 years). Your flat is losing value every year unless you use your right to extend the lease.
Regarding getting freeholder's permission - if you have the freeholder's contact details, then it usually a formality to change the names on a lease, some freeholders may charge a small amount for it. He can't demand you extend the lease but, again, it would be really foolish not to.
Thanks for your replies.
In an ideal world we would extend the lease first, but we currently have an interest only mortgage with only 10 years left so it makes more sense get rid of that.
DH put in a large deposit when he bought the flat so the mortgage company wasn’t wasn’t bothered (this was 10 years ago before things tightened up) and our solicitor didn’t mention the length of the lease. DH’s previous flat had a 900+ year lease so neither of us knew much about them - an expensive mistake.
The plan is to clear the mortgage and then save to add to what’s left of my money to extend the lease. I’ll be 100 and DH 120 when the lease expires so I’d rather know we didn’t have to worry about a mortgage.
Do you definitely not want to ever sell the flat or leave it as inheritance? The cost of extending the lease is constantly increasing and now that is down to only 58 years, it'll be very dear.
With regards to the other stuff, seek advice from. A solicitor or accountant. I'd imagine that as a married couple your assets are joined regardless of whose name is on what.
I agree with previous advice. The interest rate on your mortgage is likely to be lower than the rate at which the premium for extending by your lease is increasing. If your circumstances change for any reason you are very unlikely to be able to sell your flat without having extended the lease. It makes far more financial sense to put the inherited money towards extending the lease and if you have anything left over, then pay down the mortgage.
I agree. Think really seriously about extending the lease now. No point in paying off the mortgage on an asset which will is diminishing in value.
When I looked in central London to buy 2 years ago there were a couple of flats kicking about in a really great location with similarly short leases that just weren't shifting. The owners also seemed totally oblivious to how precarious a position they were in. Not many people have the cash to buy a flat and pay out 80-90K to renew the lease and mainstream mortgage companies often won't touch a flat with a short lease.
The lease extension calculations are really complex but to put it in context these were flats worth about 650-700K with a lease extension.
The tipping point is 80 years before that you just pay admin fees essentially below 80 years and you have to compensate the freeholder because you are depriving them of the right to take back the flat in X number of years. Shorter the lease the more the fee.
I also agree about the lease.
If seems a bit daft to be mortgage free on a worthless flat when you have the option of extending the lease.
I think you need to take advice. The priority must be to extend the lease. With a lease that short it makes it almost impossible to sell, you probably won't be able to remortgage and the cost of the lease will continue to increase
Thanks for all your advice.
The problem is this is an interest only mortgage so we can only overpay by a certain amount. There’s not a chance of us being able to change to a repayment mortgage so it’s hard to know what to do for the best. I know the cost of the least is increasing, but we don’t have the money to do both. There would be a chunk of money left but, we could save the mortgage money and would be able to renew the lease fairly quickly.
Thanks again, this is a pretty crap situation all round. If only we’d known more about leases when we bought (or the solicitor we paid a large amount of money to had told us)!
I should have added we had a quote from the freeholder of £32k to renew the lease. I know that increases year on year but with what’s left of the money plus some serious saving it’s doable. We can’t move as DH can’t leave his Mum so selling isn’t an issue right now.
I don't know how much money you'll have, but the best option (if possible) would be to extend the lease and pay down the mortgage. With the remainder still outstanding, you're likely to be able to change to repayment mortgage as your affordability will improve. In addition, you'll have more equity in the flat (with the lease extension in place) so you'll be able to get much lower rates.
When it comes to the lease extension, the 32k quote will increase considerably every year. As far as I know, you won't be able to pay that in instalments so you'll need to have the full amount saved.
The long and short of it is that if you can't afford to pay off your interest-only mortgage at the end of its term then you will have to sell your flat (unless you are able to remortgage which, as I said, is unlikely with such a short lease). However, you won't be able to do that if you have a very short lease - or you will only be able to do that to cash buyers who will use the lease length as leverage so you may not end up getting the price you want or need.
I don't know how much money you are inheriting but, if you can possibly cover the extension then that should be the priority. Depending on how much time you have left until you redeem, it will at least buy you some time (literally). Good luck.
Believe me, there isn't a cat in hell's chance we'll get another mortgage! DH is 63, self employed and works part time and I have previous serious credit problems that will have to be declared.
We'll definitely get enough to clear the mortgage and, after speaking to DH, we may be able to scrape together the money for the lease extension as well. I've looked at an online lease calculator and it should cost us £32K-£35K plus costs which may be doable.
Hi OP, the problem is that as each year passes, the cost to extend the lease increases (ie the amount of the payment you'll need to make to the landlord rather than the admin costs).
I know . I want to do it as soon as possible, but the mortgage causes a problem. If it was repayment or we could get a mortgage then it would be so much easier!
The sooner we can do it the better as I don't want to give the landlord a penny more than necessary as him and I don't see eye to eye. Luckily DH gets on OK with him (and is more tactful than me)!
Thinking outside the box, would you consider moving to a cheaper flat in the area? (I know you want to stay locally).
You could sell your current property offering to extend the lease with completion. The solicitor can coordinate it so that when the purchaser completes, some of the proceeds go to you and the money for lease extension goes to the freeholder. That way, you could get a normal market price for he property (selling with the short lease, you'd only get a small fraction).
With the proceeds from the sale + inheritance money, you could buy a cheaper flat that has a long lease and you'd be mortgage free.
If you proceed to pay off the mortgage, you'll end up with a quickly depreciating asset. And I suspect that with your history of debt and DH working part time, you'll struggle to save up that 35-40k for your lease extension.
Our least extension took 2 years...went to a tribunal etc, don't assume it will be quick but I echo others to say this should be the priority
Correct me if I am wrong but if you let it go to 0 yrs and are lucky enough to live to 100 you will literally be giving your flat to the freeholder, that would make my blood boil!
Thanks for all the advice, we have taken it all on board. Can I ask a question though? Everyone is saying there’s no point paying off the mortgage if we’re not extending the lease which is fair enough. What do you suggest we do about the mortgage?
As I explained in an earlier post we’ve got an interest only mortgage and can’t get a repayment mortgage so we’re still stuffed as far as I can see but will be no better off as the mortgage won’t be decreasing. At least being mortgage free we’d know we both had a home for life.
Sorry if it sounds as though I’m being dense!
Sorry, I missed JoJo’s question. Moving to a cheaper property in this area isn’t an option. We’re in a one bedroom maisonette now and if we moved somewhere cheaper (if we could find anything) would mean losing the garden at best, moving to a studio flat at worst. Losing the garden isn’t an option as we have a cat.
The lease extension should be as everyone said - the priority. The amount this increases every year will be more than you pay on your mortgage.
If you don't do it you are putting your money into a black hole, as it will be unsaleable. Don't assume you won't ever need to sell - care fees, disability later in life, any number of reasons.
I see what you mean about being able to save once you've paid off the mortgage for the extension. It may be worth paying a couple of hundred quid for financial advice, given the large sums of money you are taking about.
Or, if you don't mind, post your figures here and let us assess it.
Sorry, I got side tracked and forgot to reply. Once again, thank you for all the advice and I have taken it on board, even if it might not sound that way!
In an ideal world, we would use my inheritance to renew the lease, pay off as much of the mortgage as possible and move the balance onto a repayment mortgage. That’s not going to happen though for the reasons above.
We only have a rough idea of what I will inherit as we are waiting for a property sale. An offer has been accepted though and, if everything goes to plan, there’s a reasonable chance that we’ll be able to do it. DH is going to approach the freeholder (he gets on ok with him) and explain the circumstances and get a rough idea of the figures involved and take it from there.
Right, DH contacted the freeholder and was quoted between £32K-£38K to take the lease back to 99 years. DH said that was more than we were expecting (the top end) and it's now going to be done for £32K plus costs. The freeholder also agreed to hold that price for 3-6 months, so once Christmas is out of the way we are going to approach some solicitors and get the ball rolling.
Thanks for all your advice, I'll update the thread as and when in case it helps anyone else.
It might be possible to extend the lease for less - it's down to negotiation based on a set or rules not just going with whatever the freeholder says. You should also push for a much longer lease extension, eg to 125 years. If you ever decided to sell (for example to move to a different area in retirement), buyers psychologically much prefer 100+ left on the lease.
We know him and there’s no negotiating. The price is the bottom end of the scale according to all the lease calculators I checked. He won’t extend past 99 years, we asked. It won’t be a problem though as he owns all the maisonettes here and there’s never a problem selling.
If he would extend past 99 years I presume there would be an extra cost which we really can’t afford. This and paying off the mortgage will use my inheritance so we don’t want to get into debt to do it.
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