HomeOwners Alliance logo

Membership sale 10% off! Join to access our home helpline, discounted conveyancing & legal service

Sales falling through due to inconsistency from lenders on leases

Mortgage lenders need to standardise their policies in relation to lease length in order to stop sales falling through, say experts.

June 12, 2019

Leasehold sales problems

Mortgage lenders must standardise their policies regarding unexpired lease terms in order to stop sales of leasehold properties falling through, says a conveyancing body.

Lenders used to typically require a lease with more than 50 or 55 years on properties to qualify for a mortgage. This would usually represent the term of the mortgage plus 25 years.

However, the Society of Licensed Conveyancers has accused some lenders of changing their policies to require the period of unexpired leases to be 80 or even 90 years, according to a report in Estate Agent Today.

The Society says this is causing major problems for leaseholders. Many of whom only find out when they come to sell their properties that they need to extend their leases.

The impact of this causes delays to the buying and selling process. And in some cases causes the sales to fall through.

Understand the pros and cons of extending your lease, when and how to do it

Changes hitting property values

The Society’s spokesperson John Clay says these changes are having a negative impact on the prices of leasehold properties.

“It is now the case that many properties coming to market have unexpired lease terms between 55 and 80 years which will affect their value and potential saleability,” he says.

“There appears to be no coherent reason for the change in lenders’ policies and indeed many lenders still apply the traditional model of the term of the mortgage plus 25 years.

“However, the changes by some lenders have resulted in the down valuation of many properties by RICS valuers and in some cases, it is causing blight.”

Extending your lease: A Step by step guide

More than one million homes could be affected

The society doesn’t have figures on how many properties may have unexpired leases of less than 80 years. However it believes the number could be over one million.

In a bid to solve the problem, the society has asked UK Finance – a trade association for the UK banking and financial services sector – to engage with its members on possible standardisation of policies.

Get fee-free expert mortgage advice today from our partners at London and Country. You can start your search online or speak to them today

What should I do?

If you own a leasehold property and are planning to move house, it’s essential to check as soon as possible how many unexpired years the lease has left. That way if necessary, you can extend it before you put your home on the market. But bear in mind that the extension could cost thousands of pounds.

And if you’re looking to buy a home and the property you fall in love with is leasehold? Likewise, you should enquire immediately how many unexpired years are left on the lease and consider asking the homeowner to start the lease extension now (as you won’t be able to start the recommended statutory lease extension process until you have owned the lease for two years.)

Our guide on getting a mortgage on a leasehold property is a must read.

HomeOwners Alliance Chief Executive Paula Higgins explains: “We have been highlighting this issue for years and warning home buyers that if the property they find has a lease of less than 80 years then beware as it will be a struggle to get a mortgage. Home owners also need to dig out their paperwork and check the length of their lease. The longer they leave it before extending their lease, the more expensive it will be.”

Find a leasehold extension solicitor today. Our partners have over 25 years experience and will give you a free phone consultation today

She added, “The leasehold system is outdated, unfair and finally being investigated by Government. It’s likely that as a result, the leasehold extension process will be reformed and simplified. However, this could take some time.

“In the meantime, home buyers need to make themselves aware of what they are buying and the costs, now and in the future of owning a leasehold.”

 

 


Leave a comment




* required

1 Comment

  1. Avoid long leasehold, so many issues with it.
    Rising ground rents, service charges, permission fees,
    high cost to extend a lease or buy the freehold.
    England and Wales the only places left using feudal
    long leasehold, everywhere else uses Commonhold where
    at least the residents are in control of the building rather
    than a remote freeholder, who usually only cares about
    extracting as much money as possible from the building.

    Comment by Simon — June 14, 2019 @ 2:20 pm

Compare conveyancing quotes in a few simple steps

iStock_000016134021Small-520x280

Simply complete our online form to receive instant quotes from quality assured solicitors and licensed conveyancers, ranked by best price, customer satisfaction rating and location.

Get Quotes Now >

Become a member today

Become a member of the HomeOwners Alliance:

 

✓ To Ask an Expert
✓ Access our Home Helpline
✓ Free Legal Advice Line
✓ Fee free mortgage advice
✓ Discounted conveyancing
✓ Unbiased advice

Join today >

Looking for fee free mortgage advice?

We’ve teamed up with the UK’s leading fee-free mortgage broker to provide you with expert advice.✓ UK’s leading fee free mortgage broker

✓ Compare 1000s of mortgages

✓ Fully qualified advisers

✓ Winner 2017 What Mortgage Awards

Find out more >
 
×

Sign up to our FREE weekly newsletter

for the latest news, advice and exclusive money saving offers