Selling a flat while lease extension is on-going

[ldnflatbuyer2021]

Hi,
do you know whether it's possible to extend the lease for the buyers (and make a few more changes to the lease) whilst simultaneously there is an on-going purchase?

Does the buyers solicitor then have to read two leases - the current one and the approved new lease before being able to sell to you?

Or can you just sell the current lease and assign the benefit of the lease extension to the buyer (new owner)?

Or is it best to extend the current lease (and make some variations to ti), update it in land registry and then have the buyers conveyancers work on it?

Yes, you can definitely do it but you need (a) the buyer to understand the position and (b) solicitors who have an understanding of the process so they can deal with it. Are you going through the statutory process or a voluntary process?

I can't answer your questions but I wouldn't buy a property until the lease was already sorted.

We own a share of the freehold so it was easy to get it approved by the management company.

@GU24Mum

Yes, you can definitely do it but you need (a) the buyer to understand the position and (b) solicitors who have an understanding of the process so they can deal with it. Are you going through the statutory process or a voluntary process?

How do you mean? Would this be in case of the option where the extension is still not registered?

There are processes where the claim can be assigned to the new buyer and provisions written in about who controls the process. It does need a solicitor (on both sides ideally) who has an understanding of what you need. It's easier to do it under the statutory process though rather than the voluntary process as that has set steps and timings.

You also need to make sure that the buyer knows exactly what you are (and aren't) selling.

It's easier to wait til it's finished ..... but if you want to know whether it's possible to sell during it, you can do.

@GU24Mum

There are processes where the claim can be assigned to the new buyer and provisions written in about who controls the process. It does need a solicitor (on both sides ideally) who has an understanding of what you need. It's easier to do it under the statutory process though rather than the voluntary process as that has set steps and timings.

You also need to make sure that the buyer knows exactly what you are (and aren't) selling.

It's easier to wait til it's finished ..... but if you want to know whether it's possible to sell during it, you can do.

Yes I thought it's much easier to sell once it's done.

But I do wonder - since the lease extension has been written / approved - and is just about to go for registration to Land Registry, can the buyers solicitor just check the current lease or should they only look at the new lease?

I’ve dealt with plenty of these at work.

Get the lease extension in your name ready to complete whilst you’re selling. Your solicitor sends the draft lease extension to the buyer’s solicitor to give their client all the details.

Add lots of clauses to the contract about you getting the lease extension completed on the same day as your sale and you paying all the costs.
Buyer’s solicitor registers the lease extension at the same time as they register the transfer of ownership at the Land Registry.

If you wait to sell until it’s done, it will take ages to register (Land Registry is v busy right now) and you’ll probably have the buyer’s solicitor refusing to exchange until it’s registered.

And they will need to check the lease too. Lease extensions only change specific bits of the lease.

This happened with our neighbour and it was fine (solicitors for both sides reviewed the proposed changes which were principally to extend the lease and also to reflect some structural changes and an agreed revised split of shared costs) - the vendor also agreed to cover the cost of the lease revisions. It isn't really a risk for the buyer if it's a situation where all leaseholders are acting together to change/extend the leases, they are unlikely to be acting against one leaseholders interest, but your solicitor should flag up any proposed changes that disadvantage you.

And as MinnieMountain said - this can take FOREVER to actually get done so I wouldn't wait.

@MinnieMountain

I’ve dealt with plenty of these at work.

Get the lease extension in your name ready to complete whilst you’re selling. Your solicitor sends the draft lease extension to the buyer’s solicitor to give their client all the details.

Add lots of clauses to the contract about you getting the lease extension completed on the same day as your sale and you paying all the costs.
Buyer’s solicitor registers the lease extension at the same time as they register the transfer of ownership at the Land Registry.

If you wait to sell until it’s done, it will take ages to register (Land Registry is v busy right now) and you’ll probably have the buyer’s solicitor refusing to exchange until it’s registered.

And they will need to check the lease too. Lease extensions only change specific bits of the lease.

Thank you for the detailed answer!

We were planning to also "modernise" our lease which is from 1980s - meaning we would add a few more modern clauses and change the old wording - but as mentioned this has been approved by the management company.

Should we speak to the buyers solicitors to have a look and review all of these changes as well?

@sleepwhenidie

This happened with our neighbour and it was fine (solicitors for both sides reviewed the proposed changes which were principally to extend the lease and also to reflect some structural changes and an agreed revised split of shared costs) - the vendor also agreed to cover the cost of the lease revisions. It isn't really a risk for the buyer if it's a situation where all leaseholders are acting together to change/extend the leases, they are unlikely to be acting against one leaseholders interest, but your solicitor should flag up any proposed changes that disadvantage you.

So how did the sale and lease extension happen at the same time?

Basically was it that the sale completed first and then the lease extension also immediately got entered into the land registry?

The sale happened and the lease extension is still being processed (ages afterwards).

I think in your mind you need to be clear that unless it is very imminent and coincidental (unless you have the unusual situation of one house and one lease under freehold) the timing will have nothing to do with your purchase as its a whole block, not just one lease. The lease as it is is what you are buying and the lease with changes is what you will end up with eventually. Your vendor has presumably agreed to the changes along with the other leaseholders and you need to be happy with them too (your solicitor should help with this). Who pays for the administration of the changes is between you and vendor. The purchase price of the property may reflect an already extended lease but you may want to negotiate on this point as it isn't yet enacted...will probably only make a material difference on this point if the existing lease is getting short though.

btw the buyers solicitors probably won't be interested as it doesn't affect them, unless the vendor is agreeing to shoulder some or all of the associated fees.

I did this about 15 years ago so things might have changed. To further complicate the matter, my buyer moved in and rented the flat off me before we completed on the lease extension and sale - I'd already moved out and she needed to relocate to start a new job. We wrote the terms of the rent into the contract and exchanged that before she moved in. It worked out well in the end!

Your solicitor will advise you on what to send when but if there’s a lease extension being progressed, as a buyer’s solicitor I absolutely would expect to see it as part of the title checking process.

The sale and the lease extension can happen on the same day as the freeholder’s solicitor gives an undertaking (legally binding promise) to your solicitor to complete it on the same day.

@MinnieMountain

Your solicitor will advise you on what to send when but if there’s a lease extension being progressed, as a buyer’s solicitor I absolutely would expect to see it as part of the title checking process.

The sale and the lease extension can happen on the same day as the freeholder’s solicitor gives an undertaking (legally binding promise) to your solicitor to complete it on the same day.

"as a buyer’s solicitor I absolutely would expect to see it as part of the title checking process." -> so as the buyers solicitor, you would check the lease extension during which step of the process? Are title checks done initially along with checking the lease?

Hi OP, apologies, I think I have been talking at cross purposes, assuming the whole block of leases were being extended at the same time-my experience of the process. I think you mean just one flat, so ignore my confusing answers above

When I sold my flat (to be fair a long time ago) a price was agreed to j Clyde the lease extension. The value of the lease extension was paid to solicitors and done as part of sale process. So I sold it as x years and they bought at y years

@sleepwhenidie

Hi OP, apologies, I think I have been talking at cross purposes, assuming the whole block of leases were being extended at the same time-my experience of the process. I think you mean just one flat, so ignore my confusing answers above

Yes it's just one flat at the moment... though the remainder of the block will get extended soon - within a year or two...

The flat below ours (there are just 2) was sold while we were in the drawn-out process of buying the freehold of both, which meant new leases anyway.

The buyers’ solicitors were evidently concerned, but we informed them of the state of play and gave them contact details for the specialist solicitor who was handling it, which evidently reassured them, since the purchase went through with no problems.

@GETTINGLIKEMYMOTHER

The flat below ours (there are just 2) was sold while we were in the drawn-out process of buying the freehold of both, which meant new leases anyway. The buyers’ solicitors were evidently concerned, but we informed them of the state of play and gave them contact details for the specialist solicitor who was handling it, which evidently reassured them, since the purchase went through with no problems.

Thanks. So they probably gave drafts of the new leases to the buyers or I guess they were ok knowing it would get a share of the freehold?

I’d ask for a copy of the lease extension so I could read it as part of the title check as soon as I knew it existed/is being drafted. We often find out after we’ve gone through the initial title but that’s fine.

I’m a bit confused as you seem to have a thread about selling but I thought I saw a thread from you about buying yesterday.

Anyway. I had a situation where I had a lease extension in progress and my solicitor said if not done in time (as other flats were being done at the same time) the rights for mine would be assigned to the buyer. I thought they’d be pleased if that happened. all paid for by me and they would have their own name on the lease extension.
(Though to be fair the costs weren’t that much to me, share of freehold so just legal and management agency fees).

Oh no they tried to add all sorts of things to the lease extension. It was just a simple deed of variation to extend the lease. They tried to cherry pick things from a modern lease and add to it. I myself would not have agreed to that with my share of freehold hat on (in that case better to have an all new lease) let alone the other share of freehold people/flat owners. Also you can’t have one flat having a significant different lease they’d all need changing and the other flats wouldn’t want to pay for that for their flats.

My advice is get it sorted before sale.

OP
You said
OP you said
“since the lease extension has been written / approved - and is just about to go for registration to Land Registry”
And
“We were planning to also "modernise" our lease which is from 1980s - meaning we would add a few more modern clauses and change the old wording”

These are significantly different situations. Which is it?