Lenders looking for longer leases
A spokesman for the society says that lenders used to look for an unexpired lease of 50 to 55 years on properties in order to offer a mortgage, which usually represented the mortgage term plus 25 years. However, some lenders are now requiring the unexpired lease to be around 80 or 90 years. This leads to some leasehold property owners only finding out when they come to sell the property that the lease needs extending; causing upsetting delays or disappointment if the sale falls through.
SLC calls for lender standardisation
The change, for which there seems to be no real reason according to the SLC, but which, in our view seems to be due to valuations, the number of leases coming to an end and an increase in property prices/lease extension prices, also means that properties with a lease of 55 to 80 years are becoming more difficult to sell as buyers are unable to secure mortgages and values are reducing. This has led to the SLC calling for the UK banking and financial services trade association, UK Finance, to work on standardising policies with lenders.
Graysons’ conveyancer, Katie Bacon, says:
“Extending your lease gets more expensive as the remaining lease term gets shorter so, whether you are planning to sell now or not, it may be worth reviewing the length of the lease and considering looking for an extension now. Also, if you are looking at buying a leasehold property, it is worth checking the length of time left on the lease and asking if the seller can extend it before you buy. If you do buy a property on which you know you need to extend the lease, you will not be able to do so by following the statutory procedure until you have owned it for two years. However, you don’t need to live in the property for any particular length of time if you do not follow the statutory extension route and are willing to negotiate the extension with the freeholder. Here at Graysons, we have experience of dealing with leasehold extension carried out using the non-statutory route and can ensure that your transaction goes smoothly.”
Author: licensed conveyancer, Katie Bacon