Clause in lease seems to have put a spanner in the works for BTL remortgage

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  • Clause in lease seems to have put a spanner in the works for BTL remortgage

    I own a flat which has an unexpired lease. I am in the process of remortgaging the flat. I received a mortgage offer from a lender. However, I had only nineteen years left on my lease; The lender requires all properties on which it lends, to have a minimum of twenty years remaining on the lease.

    The lender's offer was therefore, subject to me having the lease on my flat extended. I contacted the solicitors acting on behalf of the owners of the freehold, and began the process of extending the lease as per the requirement of the lender.

    However, the new mortgage is a BTL (buy-to-let) mortgage, (the current mortgage being a straight forward residential mortgage) - and there is a clause in the lease that specifies that the property can only be let for three years in any contiguous four year period. I'm not sure what the motivation for this clause is, as my next door neighbour for instance has let his flat out since the very early 2000's, and many of the flats in the building are not owner occupied - for several years. The lender has asked the wording of the that clause in the lease specifying a three year limit to be removed (or changed).


    I have the following questions:
    1. What is the likelihood that the solicitors acting on behalf of the freehold, can change the wording to suit the lender - given that s good proportion of the flats in the building are tenanted (and have been so for numerous years exceeding the stipulated four)?
    2. In the (hopefully unlikely) event that this is indeed an impasse, I will have to make another mortgage application after the lease has been extended. Am I correct in assuming that this issue (where the owners of the freehold got involved), only arose because the lease had to be extended? If that is the case, then a backup strategy would be (in the event that we have come to an impasse), simply to complete the lease extension and then reapply after the lease has been extended. I would like clarification, if matters are as I have described above.
    Last edited by TakashiJo; 06-01-2019, 15:00 PM. Reason: Clarified title text, also added relevant tags

  • amorgan
    replied
    It is worth asking the other leaseholders who they used as the draft wording would already be in place. It may well be in the form of a deed of variation that sits on top of the existing lease. They could perhaps use this opportunity to also vary the covenant restricting continuous letting.

    Leave a comment:


  • TakashiJo
    replied
    Can anyone recommend a procedure (apart from the obvious Yellow Pages / Google search) to find/select a solicitor who can assist with the lease extension only?

    Last but not the least (I know this is a bit of a "how long is a piece of string" question), what is the ballpark figure I should expect to pay for a solicitor acting on my behalf, for the lease extension ?

    Leave a comment:


  • TakashiJo
    replied
    When I first purchased the flat, I had the option of buying a share of the freehold. I delayed on exercising that option, until now. I daresay, there are others who may have not as yet, exercised that option too.


    Regarding the other points you make, I am not a lawyer, and to be honest, I find the whole process unnecessarily complicated and baffling.

    The conveyancing solicitors acting on my behalf informed me that they only do conveyancing. I was under the impression that they were also going to work on the lease extension part - since the loan offer was contingent on the lease extension.

    To be frank, (as a lay man), I don't even know what "working on the lease extension" means. As far as I understand it (the legal part of it) that is - I have already dealt with the tax implications), it is simply receiving the documents for the lease from the lessor, and ensuring that the term is now indeed, 999 years.

    I have had to pay the lessor's solicitor's an undertaking fee for this, and the whole thing seems like "rent seeking behaviour" for what is effectively, checking that the lease has indeed been extended to 999 years - which I could do myself; yet, I can only do this through a solicitor.

    I don't mean to cast any aspersions on the profession, but I really don't I see why so many solicitors are involved - yet, here we are.

    Leave a comment:


  • Tipper
    replied
    If your lease is being extended to 999 years then isn't this being done as a benefit to all 'freeholders' and will be done at an all inclusive rate for all the leases together?

    Why then do you need a separate solicitor to extend your lease?

    If enough leaseholders want more freedom to let their properties then you may find a majority move in this direction can be pushed through. You need to talk to the other leaseholders about it.

    Leave a comment:


  • TakashiJo
    replied
    leaseholder64 Thank you very much for the clarification. This is exactly what I thought you meant.

    As a complete aside (apart from the obvious Yellow Pages / Google search) can you recommend a procedure to find/select a solicitor who can assist with the lease extension only?

    Are there online services (such as conveyancing direct), that provide a no-frills legal service I could use just for the lease extension?

    Last but not the least (I know this is a bit of a "how long is a piece of string" question), but given how knowledgeable you appear on the subject matter at hand (I have also checked your previous answers on this site), what is the ballpark figure I should expect to pay for a solicitor acting on my behalf, for the lease extension (I'm taking about a bare minimum service of corresponding with the freeholder's solicitors, and not asking them to change the terms of the lease - which I thing would be impossible, since the same lease affects all properties in the building).

    Thanks

    Leave a comment:


  • leaseholder64
    replied
    If you try to defraud a mortgage provider, you can end up on a black list of people who cannot obtain mortgages. Whilst it might not meet the definition of fraud, failing to tell them something that might cause them to refuse the mortgage doesn't seem a way to look good to them.

    If the solicitor checks the lease and discovers the issue, they haven't really been misled.

    If the lease says that the freeholder covenants to enforce similar covenants in other leases, your lease cannot be changed without changing all the other leases. Otherwise the freeholder would be putting themselves in a position where you could cause them to breach the terms of the other leases.

    In some circumstances, consistent failures to enforce a term in a contract may make it impossible to enforce that term. I'm not confident that I can say whether or not that would apply in your case.

    Leave a comment:


  • TakashiJo
    replied
    Could you please clarify the emboldened parts of the following statements?

    Originally posted by leaseholder64 View Post
    If you get caught out other than in the initial check by the mortgagee's solicitor, you may find it very difficult to get a mortgage in future!

    Originally posted by leaseholder64 View Post
    The difficulty of changing the lease will depend on whether the lease promises the benefit of that covenant to other leaseholders, and whether the freeholder believes that lots of sub-lets increase or decrease the value of the property. There may be an estoppal issue, but I don't feel confident to consider that.
    Thanks

    Leave a comment:


  • TakashiJo
    replied
    Thanks guys, for the feedback. Here is some further information: I own a share of the freehold (I find the terminology confusing), and the lease is being extended to 999 years.

    I don't know if this additional information is material to the case or not, but just thought I'd provide it as well.

    Leave a comment:


  • Lawcruncher
    replied
    I have seen an "only be let for three years in any contiguous four year period" provision before and am not sure what it is supposed to achieve.What you need to do is to tell your conveyancer what you want - presumably the ability to sublet on short leases without having to obtain consent or pay any fees - and get him to negotiate for it.

    Leave a comment:


  • leaseholder64
    replied
    I imagine the purpose was to allow owner occupiers to let out the property if they had to work away from home, whilst not allowing sub-letting to be the primary use.

    If you get caught out other than in the initial check by the mortgagee's solicitor, you may find it very difficult to get a mortgage in future!

    The difficulty of changing the lease will depend on whether the lease promises the benefit of that covenant to other leaseholders, and whether the freeholder believes that lots of sub-lets increase or decrease the value of the property. There may be an estoppal issue, but I don't feel confident to consider that.

    Leave a comment:

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