The regular readers of my newsletter will recollect my welcoming and heralding the arrival of my new team member, Darren Heard, who spends his days with me extending leases/purchasing freeholds (indeed, some of you may have spoken with him or e-mailed him).
His arrival was eagerly awaited by me as my other colleague who had assisted with lease extensions etc was part of the Residential Conveyancing Team (and I had never quite known what his day to day work comprised). Since Darren's arrival I have been staggered by the work involved in lease extensions and how complicated it actually is (with hindsight, I have been guilty of over-simplifying the process I suspect).
So, what is actually involved with extending the lease (and this is before the documents are signed and then go over to the lender's Solicitors - and we all know and have experienced what a drawn out process that can be)?
1. The clients are advised on their options - i.e which route is best for them - informal negotiation, but they have to be warned that a statutory extension may mean a lower premium being paid, albeit a longer, more drawn-out process. This letter has to be detailed because if the clients also own the freehold there are possible tax and/or privacy issues to consider.
2. Once instructions are received the Landlord/freeholder needs to be approached to request their terms of extension and to ascertain how they wish to proceed. This can, and often does, involve in a detailed review of the lease and tracing the Landlord. Eliciting a response can be lengthy and often client chasing has more success.
3. When the Landlord does reply (and I will not cover the lengthy Statutory extension process) we then have to go back to clients reporting on likely costs and again giving options. The costs will generally include being responsible for lease valuers (between £500-£3,000, and this often has to be paid up front), Landlord Solicitor costs (generally no more than £1,500) and a Landlord premium. The larger costs do not have to be paid up front but we do have to enter into legal promises on behalf of the clients to pay Landlord Solicitor costs even if the extension falls through.
4. It is then a matter of documentation being drafted and approved, which can take weeks.
5. Once we have reached the final stages (in other words we are happy that the client is acquiring a sensible lease) then we send it to lender Solicitors for their approval - please bear in mind that if this were the non-ER market at this stage we would submit our Certificate of Title and complete within 5 days. At the moment (and any lenders reading this please note) we then have to endure papers going to the technical teams of the lender Solicitors and waiting for a minimum of 2 weeks before we get any response at all. At this stage (and no names mentioned) we can receive typically 20-30 enquiries which do not add any security to the lender and are not necessarily relevant. A typical lease extension can take 1-3 months to complete from the stage when we would take the view that completion could have taken place.
The lease extension process is a complicated one, and it is not something that can be done "off the shelf" as I am yet to see a "stock" lease being used. When extending a lease the terms have to mirror what has gone before, and indeed mirror leases in other properties, so there is necessarily a lot of technical drafting to be done (which does take time) and argument over clause wording.
At Ashfords we long for the days when lenders take the view that for extensions we can simply submit a Certificate of Title rather than subjecting the poor clients to months of further delay.
If you have any queries relating to lease extensions then please do let us know.