Leasehold problem

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    Leasehold problem

    Hi. Trying to buy a flat in a block of 4 in a purpose built block as a BTL. The owner converted the block and has now put 2 flats up for sale. These have not had a lease on them as up to now the original owner had them rented out. We have been told by BM solutions that a lease must be in place before application. Is this the case with all BTL mortgage companies? A new lease will be drawn up but presumed this could be done at completion and confirmed by our solicitor.

    Your advice would be greatly appreciated.

    #2
    I regret to say that this is normally a pre-requisite of all lenders not just BM Solutions but may differ for Scotland. I am surprised that the vendor hasn’t done this prior to marketing the two flats.
    To understand here is the published criteria from BM which fully explains their policy to such units.

    ”Are Freehold Flats/Maisonettes considered acceptable security to the Lender?

    ​​​​​​​A freehold flat is only acceptable in the circumstances listed below. Where a property has been converted into no more than four units or is within a purpose build block, any leases should already be in place and not created at the same time as the mortgage application. We will consider lending subject to the following requirements: Tenure is leasehold and the applicant does not own the freehold or share of freehold: -The conveyancer will ensure the lease meets our standard requirements. Tenure is leasehold and the applicant owns / will own on completion the freehold of the whole building: -Our charge must be registered on the freehold of the whole building and the leasehold interest of the unit. The conveyancer will ensure the lease meets our standard requirements. -The mortgage along with the freehold and leasehold titles must be in the same name -We’ll only accept one unit within the whole building on this basis Tenure is leasehold and the applicant owns / will own on completion a share of the freehold of the whole building: -Our charge must be registered on the leasehold interest only. The conveyancer will ensure the lease meets our standard requirements -We’ll only accept one unit within the whole building on this basis Tenure is freehold: -The security will be registered on the freehold of the whole building and be processed as a freehold house -The applicant must own the freehold personally in their own name -The mortgage and freehold title must be in the same name -All units other than the freehold unit on which we’re lending must be subject to long leases (minimum 70 years) For developments of more than four units: -Tenure must be leasehold -A management company must be in place -Our customer may hold a share in the management company -The conveyancer will ensure arrangements in connection with the management company are acceptable -Our mortgage must be registered on the leasehold title

    Comment


      #3
      Nothing to do with the mortgage, but you'd be nuts to try and review and agree a lease at completion.
      You're buying the leasehold interest, you need to know what you're about to pay a huge sum of money for.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        And to add to JPKeats response , check the Service & Ground Rent Charges , how much is already in reserve for the maintenance and redecoration of the common parts , selling off units is perfectly ok but As there are no leases in place ,the vendor may have an ulterior motive so YES get the lease checked out and everything it entails.

        Comment


          #5
          Insist on a leasehold title with peppercorn ground rent and the legal ownership of the building will collectively belong to the leaseholders.

          Comment


            #6
            why should the seller agree to convey the reversionary interest to the leaseholders? There may be future development value on the roof.

            Comment


              #7
              Its not purpose built block , because its a conversion into 4 flats from an existing freehold house.

              Usually flats are sold under leasehold title in UK because mortgage lenders insist on flat having a maintenance agreement for the property as a condition for offering the loan.

              If the seller has not yet registered the leasehold title, there is no leasehold property for sale . If the leasehold is offered by seller on completion of property sale , before the sale price is agreed , you can negotiate and try to get better terms in the new lease for yourself by insisting on 999 years lease and no annual ground rent to pay ( called peppercorn ).

              Comment


                #8
                Just to confirm: The lender is insisting that a lease is actually in place before you apply for a mortgage?

                Comment

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