Funding Major Repairs

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • simon pinner
    started a topic Funding Major Repairs

    Funding Major Repairs

    As a Board member of a freehold apartment building of over 130 leasehold flats we are considering ways to raise long term financing to carry out long overdue and now essential structural repairs.
    All of the leasehoders have a share in the freehold with perpetual leasese of >900yrs and no ground rent.
    They are all however contractualy bound to pay any service charge the Board sets each year for operationg and maintaing the building.
    Past Boards have failed to anticipate the maintenance costs and raise the necessary funds to meet the needs of the building long term and now we have inhereted a crisis situation.
    A one off charge or a series of service charge increases in a short period would be hard to impose as many leaseholders are either retired or unable to pay.
    The best way forward would be to raise long term finance say over 20yrs and set thr service charge to service the loan while including a sum to raise a sink fund for the future.
    With no ground rent, the reversion value is 0, so how might a lender obtain security on say a £2-3 million pound loan over 20yrs
    The apartment values are on average £500k+
    Any thoughts or experience in a similar scenario?

  • AndrewDod
    replied
    To summarise - unless there is provision for a sinking fund you can't create one.

    a) You calculate what lessees owe according to the lease.
    b) You invoice that amount (say £20,000)
    c) If they can't pay, then they need to sell their flat in order to do so, or take a loan, or whatever. It is not your problem. They should have planned for this.

    Leave a comment:


  • leaseholder64
    replied
    Most leases won't allow you to borrow against future service charges. Trust funds generally cannot borrow.

    Try to forget that the company that owns the freehold is owned by the leaseholders.

    Does the lease provide for a sinking fund? If not this is academic, as the leaseholders could be expected to get hit for big ticket items occasionally, in any case.

    Without a sinking fund, an external freeholder is unlikely to buffer big ticket items themselves, Your company should think of itself as being distinct from its members (legally it is) and so should act as a freeholder.

    I tend to agree that the cheapest option is going to be for the leaseholders to, individually, raise the finances, against the value of their leases. If they can't do that it probably means their lender doesn't think they can afford your proposed catching up payments.

    Leave a comment:


  • JK0
    replied
    Anyone that can't raise the cash themselves has to take out a reverse mortgage? (Equity release)

    Leave a comment:

Latest Activity

Collapse

  • Mortgage ERC
    Landlord4321
    Good evening,

    I would be interested if anyone had any views on mortgage early repayment charges. Unfortunately my circumstances have changed significantly over the last 8 months and I am in a situation where I am forced to sell my buy to let property, mainly due to a change in my financial...
    19-07-2019, 20:18 PM
  • Reply to Mortgage ERC
    Landlord4321
    I believe the ERC is a set rate. Some customers will pay the fee that will equate to less than the existing interest balance so will benefit. Other customers nearing the latter part of the deal will pay a charge considerably higher than the remaining interest balance.

    I guess like anything...
    20-07-2019, 11:30 AM
  • Refinancing BTL when beneficial ownership has been moved into an LLP
    StevieG
    I moved the beneficial ownership rights to my properties into an LLP two years ago in response to section 24; however, my existing broker is unable to obtain a new mortgage for one of the properties as the tax computations associated with my SATRs now have a line for 'income from partnership' instead...
    20-07-2019, 10:29 AM
  • Legal fees or cashback for remortgaging
    blinko
    Hi guys I'm doing my first ever remortgage I wanted to ask I have 2 products to choose from both are offering me a good rate 5 year fixed 2.1% £1,000 arrangement free with free standard valuation but one product offers free legal fees and the other offers £300 cashback which one do you think I should...
    16-07-2019, 17:18 PM
  • Reply to Legal fees or cashback for remortgaging
    loanarranger
    I agree it allows the borrower a greater degree of control over the legal processes.
    20-07-2019, 10:02 AM
  • Reply to Legal fees or cashback for remortgaging
    jpkeates
    Hello 2008, welcome back!...
    20-07-2019, 08:48 AM
  • Reply to Mortgage ERC
    loanarranger
    You are indeed correct that Fixed Rate Mortgages do have products which have an ERC on a reducing scale, a feature which is fully detailed in the Key Facts Illustration, unfortunately as in your case the ERC is set at a Fixed percentage throughout the initial incentive period, this in itself might have...
    20-07-2019, 04:11 AM
  • Reply to Mortgage ERC
    Landlord4321
    Most mortgage companies offer a progressive ERC where the fee changes every year which reflects the lenders actual losses. In this case the ECR is fixed for the entire period, and I'm nearing the end of my term.

    The charge they will make is a lot more than the interest for the remaining...
    19-07-2019, 23:20 PM
  • Reply to Mortgage ERC
    boletus
    If you accept you freely entered into a business contract where the terms were explicitly stated and you were aware of those terms, then why now say it is "daylight robbery" to be held to those terms?...
    19-07-2019, 22:39 PM
  • Reply to Mortgage ERC
    loanarranger
    I regret to advise you that your entire interpretation of the law and rules pertaining to mortgage contract.
    You entered into a contract to borrow a sum of money secured against a residential property which you declared was for investment Not owner occupation by yourself, The funding as is generally...
    19-07-2019, 20:50 PM
Working...
X