Leasehold issues

[Jkla]

Hi I’m just wondering if anyone can offer any advice. We purchased a leasehold flat years ago. We then became northern rock mortgage prisoners so were effectively trapped with them as our mortgage lender as we had no equity in the property. our mortgage was then sold on to nram who kept us on the variable rate and do not offer any new deals. We recently tried to remortgage as we now have a tiny bit of equity in the property. Unfortunately we discovered the issue of there being a mere 52 years left on the leasehold which has now thrown a huge spanner in the works. When we purchased the flat it had 66 years on the lease but the solicitor never flagged that this would become a serious issue to us. As naive first time buyers we were completely unaware of this and back in 2006 shows like homes under the hammer (that clearly evidence the pitfalls of leases under 80years) weren’t really showing on tv and sharing this sort of info. I appreciate we had a duty to do our own research but my question is should the solicitor not have mentioned this issue to us if he was acting in our interests? It’s going to cost us over £11000 to extend the lease in order to remortgage the flat and we just can’t afford that.

Thanks in advance

A lot of this probelm is your own making but you know that

firstly 11k to extend the lease is a bit of a gift given how short you let it run. I've seen them upwards of 30k

When we purchased the flat it had 66 years on the lease but the solicitor never flagged that this would become a serious issue to us

Check your paperwork to see if this is def true and go see an ombudsman.
But be advised 70 years was considered absolutely fine (i believe its more to do with morgageability) in 2014 so i am not sure you have a leg to stand on. Hopefully am expert will come along shortly.

Did you have any issues getting a mortgage on it in the first place because of the lease, OP? I appreciate that it is frustrating. I'm assuming that the problem now is that the lease doesn't have the required 25 or 30 years left to run after the mortgage term?

I've never had a leasehold property but I do know it is common in flats. It is a tricky situation, the leases get more expensive to renew the shorter they are and yet you are a bit stuck if you can't afford to renew it now. But unless you can sell to a cash buyer, anyone else trying to get a mortgage on it would have the same problem.

Thankyou, I’ve checked the paperwork and it was definitely 66years when we bought in December 2006. I’m completely aware it is our own doing and nobody forced us to purchase the property but I do feel maybe the solicitor could have mentioned this would become such a serious issue since we were paying him for his service and the Solicitors Regulation Authority has a code of principles Including acting in the clients best interests that should be adhered to.
As you say it is likely to become a lot more than 11k with legal fees etc but it is a very cheap flat not really worth much and the quote I have is based on the value of the flat etc. However much it costs I doubt we can afford it so are likely to be paying higher interest for the duration and then who knows what will happen when the lease runs out!

Very much kicking myself!

Hi @ChicCroissant. Thanks for your reply, no we never had any issues getting the mortgage initially but I should probably add we were advised to take a norther rock mortgage and I think they mortgages anything for anyone at the time

Unfortunately it seems like you are stuck between a rock and a hard place as the saying goes. Can you raise the £11k plus fees via a loan? I think it would be best to do all you can to extend the lease as soon as possible before the costs rise even further. Then, when you remortgage you could claw a little of that money back with a higher valuation for a longer lease?

Mortgage companies will not offer mortgages on properties with less than 50 years left when the mortgage termends as it makes the property virtually unsellable. I am afraid it is your responsibility and being naive has nothing to do with it. We are just about to buy a flat and it’s something that we asked about from the very first flat we saw as I researched important questions to ask. We haven’t looked at any property with less than 90 years left. £11k is a bargain to extend lease as without it your property is virtually worthless/worth significantly less than you paid

Take advice from the Lease Advice - lease-advice.org. You can book a phone appointment with a specialist solicitor (it's free). My initial thought (as a freeholder but no expert) would be that you need to extend your lease - it is only going to get more expensive to do it. Maybe you could negotiate a little with your freeholder? They might be more sympathetic than you think. Look right into the process of lease extension & get familiar with it first because one of my leaseholders paid a ton in solicitor's and valuation fees when I would have been happy to have come to an arrangement between ourselves.

@ScribblingMilly Thankyou. Unfortunately as 22 year olds we knew nothing of lease/freehold and the only mention of it was when the solicitor mentioned that the property was leasehold and that the freeholder was absent so he needed £150 off us for an indemnity policy which meant the absent freeholder was not an issue or anything to worry about. We really had nobody to ask for advice at the time and the fact the solicitor advised us it was not a problem or anything to worry about was enough for two eager youngsters to blindly proceed. So in short, unfortunately we can’t contact the freeholder!

It may be difficult for you to bring a claim against a solicitor as there are time limits on when claims can be brought. You would need to get some professional advice on this asap.

@897654321abcvrufhfgg Thanks for your really useful advice. I am more than aware we cannot mortgage or sell the property. sadly £11000 plus legal costs of upwards of £5000 is absolutely not a bargain when we live in the north east of England and the property is worth £60000 at best. You are very lucky to be buying a flat in an age where every bit of information about every single aspect of life is available to you on a phone in your hand. Sadly 15 years ago we did not have a palm size device that we could research every detail of property buying morning noon or night. Also, like I said earlier- at the time we purchased there were no homebuying tv shows that most of us would now have seen advising us never to touch a leasehold with less than 80 years!! None of my friends still to this day don’t understand leasehold or freehold. If you aren’t a professional and the professional you employed didn’t explain this how would you know about lease/freehold if you’d never seen it on tv or read about It, its not exactly something you learn about at school!!

@kingsassassin Thankyou, I’ve just looked into it and normally there is a 7 year limit from when you paid for the service, or 3 years from the date you discovered the issue which is only recently. Definitely need to act pronto!

it was definitely 66years when we bought in December 2006. I’m completely aware it is our own doing and nobody forced us to purchase the property but I do feel maybe the solicitor could have mentioned this would become such a serious issue since we were paying him for his service and the Solicitors Regulation Authority has a code of principles Including acting in the clients best interests that should be adhered to.

The problem is OP, your solicitor was not psychic.

1. When you bought the property it had a 66 year lease, you knew that, it was in the paperwork. You therefore must have known that at some point, you’d have to extend the lease - at a cost - somewhere down the line.

It’s only a problem now because you can’t afford the 11k+ (which is a good price) to extend, if you had the money however it would be a non issue iyswim. You can’t blame the solicitor for not predicting your future financial circumstances.

1. You bought your property in Dec 2006, the global financial crash started in Dec 2007 - that is the real reason you’re in this situation. Property prices tanked, mortgage regulations tightened (you’d never a get a mortgage on a 66 year lease now), Northern Rock went under & you found yourself trapped with no equity so unable to remortgage - you can’t blame your solicitor for that either.

If the banking crisis had not happened - and things continued as they were - you would have built equity & been able to remortgage long ago & again, this wouldn’t be an issue now.

Read over your original paperwork & if you feel your solicitor did not act in your best interests & misled you or did not advise you correctly with the information that was known or foreseeable at the time then of course follow it up.

You can’t however blame the solicitor for not predicting the future or for your lack of due diligence.

Sadly 15 years ago we did not have a palm size device that we could research every detail of property buying morning noon or night.

I was 20 years old in 2006 OP, even if you did not have a smartphone, there were definitely laptops / desktops & internet access widely available for you to research to your hearts content. This isn’t an excuse.

Also, like I said earlier- at the time we purchased there were no homebuying tv shows that most of us would now have seen advising us never to touch a leasehold with less than 80 years!!

There were homebuying shows OP, I watched lots of them. You’re right though that they didn’t really caution against buying a property with less than 80 years on the lease & that’s because AT THE TIME they weren’t such a huge no no. As you know for yourself, properties with short leases were still mortgageable back then, hence why you’re in this situation. The only advice at the time was to extend before you got below 50 years. It’s only now - post banking crisis - that mortgage restrictions have tightened & you’re advised to never touch a property with a short lease because they’re not mortgageable - hindsight is a wonderful thing.

None of my friends still to this day don’t understand leasehold or freehold. If you aren’t a professional and the professional you employed didn’t explain this how would you know about lease/freehold if you’d never seen it on tv or read about It, its not exactly something you learn about at school!!

1. You actively do your own research, as I said the internet was widely accessible back in 2006 - even if that meant sitting in a library / internet cafe for an hour.

1. You actually read your paperwork & ask your solicitor questions if you don’t understand. I really don’t understand how you didn’t know what leasehold was when the terms of the agreement are actually written in black & white in your lease... unless you didn’t read your paperwork.

Buying a property is probably the biggest investment most people will make in their lives, you don’t sleepwalk into it without doing your own due diligence.

@MissSueDenim
At no point have I said the solicitor should have predicted the future. at no point have I blamed the solicitor for us having no equity in the property. At no point have I blamed him for us purchasing the flat!! My issue is with a legal professional who we had paid to act in our best interest not raising any concerns or flags regarding the short term lease. There was no mention of what a short term lease meant and yes we were clearly very stupid to not research this further but his words regarding the lease were “the freeholder is absent but it’s not an issue if you pay for this indemnity policy and you’ll have no problems” NOTHING was mentioned about 66years potentially causing us mortgage problems and as we were paying a solicitor- an educated legal professional to protect our interests why would we not take that as an indication it was fine to proceed?! We genuinely had no idea about leasehold (and as first time young buyers why would we?)and he did not clarify what the short term lease meant. Was he acting in our best interest by not at least mentioning the possible implications for the future?! I’m sure you’d find yourself thinking slightly differently if you were in this situation. To be clear the property was not cheaper or reduced in price, nobody explained what leasehold meant or said we would have to extend the lease in future and there were no reasons for us to question this when it was brushed under the carpet so to speak.

it would be great to be so knowledgeable about everything in life like some people on here are and never make mistakes unlike our stupid younger selves. I actually came on here for advice not for people to make me feel more dreadful about the situation because they are so clever and we are clearly so stupid.

And Actually 11k plus 5k legal costs is the minimum suggested cost, it is not the actual cost and when the flat is worth maybe £60k that is not a great price! We didn’t buy it any cheaper we paid the same as people who do not have a short lease!!!

I have to renew my lease this year or next, looking at around £20k. I am lucky as I have no mortgage and no urgency to move. We want to renew long before that so the freeholders don't have us over a barrel when we want to sell.
I think people are being harsh to you OP. Yes, you should have researched more but you know that, and now you need a way forward.
If it's any consolation when we bought the lease issue was glossed over and minimised, so I do sympathise with your position.
Can you contact the Leasehold advisory service or Citizens Advice for guidance?

£5k for legal costs sounds too high. More like £3,000 if you do it in a friendly way sharing your valuation - if you track down your freeholder?

I do sympathise, OP. I'd was on my third flat by the time I understood the importance of freehold/leasehold. I think solicitors should really stress this.

MissSueDenim did make some very valuable points. Op you are very defensive - wanting to suggest you bear little responsibility for what has happened. What exactly do you want people on here to say - that there is a magic thing you can do to change what has happened?

When buying it is very much BUYER BEWARE, but if they don't know they need to beware and sent there's not a lot that can be done. In every generation, those who aren't aware of risks and don't ask the right questions of their solicitor and older and wiser friends, find themselves burned.

So what to do now? It will be possible to sell, but at the price minus the cost of lease extension plus something for the trouble someone else will have in sorting it. A cash buyer will buy it up and pay for the lease extension. It is possible for you to start the process of a formal lease extension and pass the process to the buyer and the buyer will pay the bill. Otherwise the buyer will have to wait 2 years and it will cost even more. A cash buyer will be your best bet, as they wont need a mortgage. They will be able to drive a hard bargain though, given your lack of other options.

You have suffered due to a number of things - lack of knowledge, but also the economic circumstances which occurred soon after you bought as MrsDenim said. 22 year olds buying are unusual and need lots of help and advice if they do so - from their solicitor but also family or friends around them too, for whatever reason you didn't have that or access it. At different times,msolicitors have been better/worse at pointing out things like this - partly related to whether they were a big worry at the time, and partly to do with them individually. Lots of solicitors wouldn't have made a big thing of this in 2006 if finance was easily available and there was nothing to suggest prices might tank or finance become unavailable or other things like that.

So, yes you are in a pretty unfortunate position but there's not a lot anyone can suggest to make a big difference. You will either need to stay put and borrow for the lease extension,mor try for a cash buyer and accept you won't get the market price of £60k because the market price isn't £60k with that lease length. In reality, you probably can't afford to move and will have to stay put, even though that's not what you want to do. Sorry that there's not a lot more anyone can say. Perhaps others will read this and learn something, but for you,nit has happened. I'd move away from thinking too much about who is to blame or looking to blame, but focus more on your next steps. It has happened.

OP, I was in the same situation. I bought a flat in London in 2004 which had 82 years left. 1st time buyers, keen to secure a property, didn’t question it. Then when we came to extend the lease, there’s mortgage value and we ended up paying £10000 plus legal fees. I too felt the solicitor should have pointed out the pretty basic fact that we could only extend the lease after being owners for 2 years and so it would attract marriage value. When I queried this with the original solicitor ( senior partner who devolved pretty much everything to her trainee) she washed her hands of it. I went to a barrister who said he was aware of several persons with similar grievances, might consider action, but nothing came of it. I suspect there are hundreds of cases like ours out there and if a solicitor was successfully sued it would set a scary precedent for the profession.

I don’t get the people who say it’s all on you. Surely we pay the legal professionals to check this stuff. The fact that you were 22 and a 1st time buyer is neither here nor there.

My mom was going to buy a flat a few months ago, cash purchase. There were only 67 years left on the lease so the solicitor advised her not to go ahead. The lease problems for lenders have only been recent. When you purchased the flat mortgages were fine as long as there was 30 years left on the lease at the end of the term. Now any leases under 80 years are flagged by the valuers (for mortgage purposes) and a lease extension is required upon completion of the mortgage. As has already been said that you have to have been living there for 2 years to apply for a lease extension in which case it would be a lot more than £11k. It sounds quite cheap considering you only have 52 years remaining.

There’s a group on Facebook you could join and pose your question- National Leasehold Campaign (NLC). There’s lots of knowledgeable members on there.

However, the price you’ve been quoted for a lease extension looks reasonable given how long you have left on the lease.

Your solicitors should have advised you, in writing. Check the report on title that you should have been given when you bought and see what it says. It should not only tell you the length of the lease, but flag up that it is likely to become increasingly expensive to extend it.If it doesn't, you have grounds for a formal complaint for loss.

Op - did you have any valuation report to get the mortgage - did it mention the length of the lease? Any mention of value compared to other flats with longer leases?

A conveyancing Solicitor makes sure that you get exactly what you have agreed to buy - they make sure you get a good title and the mortgage is properly registered but they do not usually advise on the value of the property or whether it is a "good buy" compared to other flats. They would be very unlikely to give any actionable advice on whether it would be sellable in the future, even if they were asked.