If you have a ‘short lease’ the answer is often yes.
When you come to sell and on the assumption your buyer needs a mortgage you may encounter a problem. Lenders have become more restrictive on their requirements for example equity release lenders ask for over 100 years on leases and many buy to let lenders now want leases of at least 85 years. Similar comments therefore apply to remortgaging your flat.
The tendency since the credit crunch is to tighten lending requirements across the board – this also extends to the security (the property) over which the loan is to be granted. This has meant the minimum number of years remaining under the lease required by lenders has increased. Previously lenders were happy with 25 years plus the term of the loan – typically 50 year leases but those requirements are being increasingly undermined by the requirement for longer and longer leases – many use a minimum term of 75 years as a benchmark.
The problem is particularly acute in the buy to let sector where lenders already have much more stringent requirements.
The lenders do not take into account the share of the freehold because they can rarely take security over your share.
If you want to know what individual lenders require you have to refer to the “Lenders Handbook” – this is an on line manual of instructions for solicitors – part I is the general requirements but part II lists the individual lenders specific requirements – (see http://www.cml.org.uk/handbook/frontpage.aspx and chose part I and II – clause 5.13.1 sets out the minimum lease term accepted by that lender). This is constantly updated by the lenders so you may find the requirements have changed since the property was purchased.
In the circumstances, it is sensible for a owner with a lease which has less than 80 years remaining to extend the lease if they have a share of freehold, As this may may take a several weeks to conclude the lease extension (especially where a number of freeholders participate) this should be started well in advance of any sale or remortgage.
There are also many other good reasons to extend your lease if you have a share of the freehold.
How much does it cost?
Typically the fees are fixed at £450 per flat plus VAT for a deed and surrender and regrant. Our costs will cover:
- acting for your and the landlord – see further below;
- a review the titles and leases in the block;
- recommendation of any changes required to the lease;
- drafting the new lease;
- obtaining consent from your mortgage lender (this is needed to transfer the mortgage from the old leasehold title to the new title);
- arranging for signature by all parties;
- dealing with formal completion, stamp duty and registration requirements; and
- storage of the deeds post registration.
In addition to the legal costs there will be a charge for any disbursements incurred (per property). This typically amounts to :
- £7.20 for obtaining office copies of the leasehold title plus shared cost of obtaining freehold title;
- £3.60 for obtaining office copies of each lease or deed filed on your title;
- £4.80 for the electronic registration application; and
- £40 for registering the new lease at Land Registry (increasing to £45 on 31 January 2022)
In addition if you have a residential or buy to let lender they may charge an administration fee for consenting to this transaction (which can vary – many do not charge for example Nationwide, HSBC, Barclays, Halifax but some do charge for example Santander £105, NatWest £75 and Virgin £100). It is rare for the charge to exceed £105.00 but this can happen for some more obscure lenders (such as Paragon (who charge £195) and CHL (who insist on outside lawyers who charge £400 plus VAT on top of the fee of £90 payable to this lender)). Commercial mortgages (linked to a portfolio) / private banks/ offshore banks may have wider requirements including searches.
It is worth pointing out that our fees cover the cost of acting for both the landlord and each of the tenants. There is never usually a requirement to have separate representation for both parties if everyone is in agreement – saving further costs.
Even if all of the freeholders do not want to participate in the lease extension themselves they may well agree to you extending your lease. It is therefore possible for them to consent to your lease extension going ahead without them but this can only happen if everyone agrees to this course of action.
Where we can help
We are specialists in dealing with these type of matters. If you require information about a particular aspect or just want to talk through the options call or email Mark Sadler on 01708 757575 email mbs@ker.co.uk
As a next step if you think you might want to use us we can circulate confirmation of our fees to you and any other owners in the block (usually by email) with a short one page questionnaire – one this is completed and returned we can start the process immediately.