I am thinking of putting my property on the market and am unsure as to whether or not I should deal with the lease extension now
To a certain extent the answer to this question depends on the state of the property market. During the 1990's and indeed up until 2008 when it was very much a seller’s market one would often find the seller and their conveyancing lawyer placing the onus on the buyer and their property lawyer to deal with the lease extension following completion.
Often the buyer would not be aware of the need for a lease extension as they were unaware the term of the lease until such time as they had placed their offer on the property. By this stage the buyer would have already been carrying the cost of a conveyancing lawyer and possibly mortgage arrangement fees and survey fees.
The buyer may also be emotionally attached to the property at this stage as well. Negotiations would often take place between the agents to see whether or not the seller would be prepared to discount the price of the property accordingly to reflect the lease extension cost. In a seller's market most sellers would take a relatively aggressive stance and effectively suggest to the buyer “Take it or leave it”. Subject to being able to negotiate a price reduction (perhaps based on the valuation of the cost of the lease extension) the buyer and their conveyancing lawyer would often have to deal with the lease extension post-completion of the purchase.
Sometimes the buyer’s conveyancing solicitors would insist on the seller assigning their right to a lease extension having first served on the landlord the first of the statutory notices. A couple of years ago most lenders at that stage would be prepared to lend on short leases provided that there were more than 25 years remaining on top of the mortgage term.
The buyer’s conveyancing lawyer would be obliged to disclose the term of years to the lender but during a period where lenders were falling over themselves to lend money most lenders were prepared to lend on short leases.
Times have obviously changed. At Fridaysmove we now generally advise our sellers who are thinking of selling their properties with a short lease to, at the very least, have information as to what the cost of the lease extension will be.
In a tough market it is advisable to have the property as marketable as possible and this means having a lease with more than 80 years to run. Given the introduction of Home Information Packs and in particular the Property Information Questionnaire (which obliges the seller to disclose the number of years remaining under the lease) buyers will be keen to ensure that they are buying a property with a longer lease and if they are not then certainly would expect the price to be discounted accordingly. In this particular economic climate, as buyers become nervous so too do the buyer’s conveyancing lawyers. The conveyancing lawyer will want to be able to have the cost of the lease extension in black and white and preferably have the lease extension finalised prior to completion. Therefore, in an economic climate which favours buyers it is generally good conveyancing advice for the seller (provided that they have the cash flow available) to complete a lease extension prior to marketing the property or at the very least during the marketing of the property.
Please ensure that if you are marketing the property with an agent you make it very clear to the agent and indeed within the Property Information Questionnaire that you are extending the lease. Please also note that the process of a lease extension can take a couple of months. Bear in mind that if you have a mortgage over the property your lender will need to enter into a Deed of their substituted security which may need to be prepared by your conveyancing lawyer and approved by the conveyancing lawyer for the bank or building society. Extending your lease is not a conveyancing exercise that simply takes a couple of days.