Skip to main content

How does my lender affect my leasehold purchase?



Article by Katie Easter -  Trainee Solicitor with MJP Conveyancing 


Conveyancers acting for mortgage advisers are under the same obligations to the lender as they are to their purchasing clients. 

These obligations include adhering in the main to the CML Handbook, a set of rules written by the Council of Mortgage Lenders which must be followed when acting for mortgage providers.

How does the CML Handbook affect Leasehold property?

The nature of leasehold property means that there are more factors that can lead to it diminishing in value compared to freehold property.  Mortgage providers therefore seek to protect themselves should they need to repossess a leasehold property by imposing strict requirements. Solicitors are obliged to ensure that leasehold property meets these requirements.

One of the biggest factors affecting the value of leasehold property is the term of years remaining on the lease following completion. Each mortgage provider that subscribes to the CML has their own minimum term of years requirements. If the term of years remaining is predicted by the valuer incorrectly, it is important for solicitors to notify their mortgage provider clients accordingly. This is one of the reasons that we must have sight of the Mortgage Valuation Report prior to exchange.

There are also requirements for particular terms to be included in leases. These include the need for other leasehold properties in the block to provide support and shelter to the flats around them. When we review leases we are ensuring that they contain rights to support and shelter from the neighbouring properties. Without these rights, purchasers of leasehold property could face expensive repairs should neighbouring properties fail to support and shelter their own. This could affect a borrower’s ability to pay their mortgage and is therefore a concern of mortgage providers.

Ground rent should also be checked to ensure that there will not be any sharp increases which could affect a borrower financially. We will check the lease and may raise further enquiries with the Vendor’s solicitors regarding this point.

It is also important to gather information about any management companies. The following items must be obtained and checked by solicitors:

1.       The lease or another agreement with the management company must give the company a right to enter the property to carry out repairs or other works.

2.       The last three years accounts of the management company should be obtained.

3.       Any details of major works that will be paid for with service charge should be obtained. It will be necessary to notify a mortgage provider if these cannot be satisfactorily obtained.


The obligations that MJP Conveyancing owe to their clients’ mortgage providers therefore govern some of the leasehold enquiries that we raise with Vendor’s solicitors. Regrettably, this can lead to some delays when purchasing leasehold property but it is important to retrieve these answers for both our clients and their mortgage providers. 

This is also why we always ensure that leasehold packs are ordered from management companies as early as possible when we are acting for clients that are selling their leasehold properties. 

Comments

Popular posts from this blog

Party Wall Act Costs - Protecting the building owner from the Highwayman

Introduction
One of the most worrying aspects of entering the Party Wall Act 1996 (Act) arena is the uncertainty surroundingfees, or as they are referred to within the Act -‘costs’.
If you are fortunate enough ( or some might say lucky enough) to have at your side a competent party wall surveyor, and one with a moral compass, the chances are you will derive a certain degree of protection.However, there is still no guarantee you will not need to set aside a considerable sum of money to cover the cost of becoming trapped within the Act.This applies equally to both building owner and adjoining owner, and one must not forget that if an adjoining owner’s surveyor does not recover all of his costs from the building owner, there is every possibility the adjoining owner may be left to meet the remaining liability.
The problem of high, unreasonable and unpredictable costs is caused, in part, by a piece of malfunctioning legislation, and patly as a result of certain unconscionable conduct on the p…

Building Regulations and moving home

Do I have supply evidence of Building Regulation Approval in respect of works carried out to my property when I look to sell my property?
If you have the approval then of course supply it – it will help to ensure your sale moves quickly.
If you have carried out works and approval was required and sought and you no longer have a certificate then call the issuing council and ask for a duplicate.
If you have carried out work, and the work required building regulation approval, but this was not sought then you need to consider with your solicitor when the work was carried out and what to do in response to your buyer’s request for sight of the approval.
The following may help.
Check that work carried out actually required building regulation approval as not all work attracts the requirement.
If the building work was carried out before November 1985 it would not require building regulation approval. There is no need therefore to supply it or offer indemnity insurance.
If work was carried out af…

Do not purchase a New Build Property without first reading this....

Buying a property which has yet to be built, or which is newly constructed should be approached with care and here are some tips which will help:
Remember those friendly and helpful people within the sales offices are sales people and are no different from those people who you would find in car and double-glazing showrooms.  They are paid on results and work under the pressure of targets.   Once they have you signed up they will be your best friend and be in regular, sometimes daily, contact until they have collected all of you money.   There are many instances when this shadowing could be conceived as harassment.At the outset you will be asked about whether you have a mortgage and a solicitor to undertake the legal work.   You will be steered towards making use of the developers preferred brokers and solicitors.  These are ‘partners’ who have been chosen to work with the developer as the developer expects those partners to report to them regularly and to do all they can to ensure the …