As the Equity Release market develops you would rightly expect processes to become more streamlined and requirements simpler; however, we all saw the impact of MMR on interest only lifetime mortgages and know that this is not always the case.
The same can be said when dealing with the legal "issues" posed by leasehold properties when the borrowers are looking to borrow from Stonehaven, Partnership, Hodge, New Life and Bridgewater. There is a significant amount of additional legal enquiries to be made which, depending on the speed of the Landlord/Management Company can add 2-4 weeks to the process (typically with Aviva, M2L, LV, Just Retirement and Pure the requirements are minimal and the address of the Landlord/Agents is sufficient for those lenders).
These additional requirements can cause unnecessary alarm/concern for clients, so as a guide for you, when you are seeing clients who live in a leasehold property what do you need to check?:
1. How long is the lease and does it need extending?
2. Do the clients have a copy of the lease - we will generally need a copy and it saves the client approx. £30 if they can let us have a copy. Also, many lenders now are requesting a copy of the lease before they will issue an offer.
3. Is there a parking space allocated to the property? If so, is this ad-hoc or specified in the lease?
4. Who is the Landlord/Managing Agent? Contact name and address is required - they will need to be contacted, so you may want to ask how efficient are they.
5. Is the borrower a shareholder of the Management Company? If so the borrowers will need to let us have the Share Certificate, Company Memo & Articles of Association, and they will need to sign a share transfer form (to be held by the lender on completion).
6. Is the borrower up to date with all payments due under the lease? If not then the lender will require that any arrears are paid on completion from the equity release.
7. Who deals with the insurance? If the clients are able to obtain a copy of the current schedule this is a huge help (and cost saving OM Peverel can charge £200+ for this).
8. Is there a Landlord consent restriction on the deeds to be obtained? Often clients do not know about this and the Landlord often makes a charge for this consent.
9. Is there any dispute with the Landlord/Agents ? If so this will generally come to light during the process; it is better to know at the start.
10. If the lease requires Landlord/Agents be served a Notice of Charge then they will generally charge for this. The costs can range from typically £50 upwards.
You will see from the above that there is potentially a great deal of additional work and costs for the borrowers involved with leasehold properties, even when it is just a standard case (and there is no extension involved).
We would always advise that when borrowers are looking at a lifetime mortgage and they have a private landlord, the potential extra charges involved with a leasehold case could be £200-300 (more if Peverel) and the time delays up to a month. If the Landlord is an internal owner- run company the charges and time delay should be much less.
If you have any queries on leasehold properties or if you ever need a copy of the leasehold deeds please do let me know.