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.
