To extend or not?
Friday, 5th September 2014
I have touched on leasehold properties on several occasions in my newsletter, and this is a constantly developing area within the equity release legal arena. It is becoming increasingly common for lenders'' Solicitors to not insist on a lease extension, which is (generally) good news for clients but of course difficult for both us and you to advise on prior to an offer being issued (and it is difficult to factor in costs and the amount needed to borrow).
So what is the best way to proceed?
1. Ascertain the length of the lease and whether the clients own the freehold. We are happy to obtain, at no cost to the client, copies of the leasehold and freehold deeds (and indeed the lease, if it is registered). If the freehold is owned by someone other than the borrower and the term remaining on the lease is less than the lender permits, a lease extension will be needed.
2. If the client owns the freehold and the leasehold (which is surprisingly common) it is worthwhile emailing your intended lender to ask if they would consider charging the freehold and leasehold without having to extend the lease. This would have the benefit of saving the expense and time involved with an extension. That said, there is an argument to say the borrower should still consider extending the lease (even if it is post-completion - which would necessitate the permission [and a fee to the lender] of the lender), because when they or their executors come to sell any prospective purchaser would want to see an adequate number of years on the lease. It would be easier to extend the lease whilst the borrower is alive than leaving it to the executors.
3. If the intended lender will not agree to proceed with charging both the freehold and leasehold then the lease extension will be an "internal" process with the borrower and should not be overly complicated, time consuming or costly (generally no more than £750 + VAT, and no need for a leasehold valuation fee).
4. As a reminder, if the lease is being extended with a private Landlord you will need to factor in a leasehold valuation fee (typically in the region of £750), Landlord Solicitor costs (approx. £1,000 + VAT) and then a lump sum premium. Our legal costs would tend to be in the region of £1,000 + VAT. The cost in time depends on the speed of the Landlord and could be anything from weeks to months - and if the Landlord insists that we proceed on the statutory route then it could take a year plus.
If you have any queries on any of the above please do let me know.