As of last Wednesday, £ signs must have been flashing before the eyes for UK freeholders. One of the UK’s largest mortgage lenders, Alliance & Leicester, announced a radical change to their requirements for lending on residential leasehold properties with short lease terms.
Like many other UK lenders, they would have lent on a leasehold property with 50 or more years remaining on the lease. However, the Council of Mortgage Lenders and conveyancing lawyers were informed by Alliance and Lester that, with immediate effect, notification is required of any Lease which has between 55 and 70 years remaining. Previous to any decision to lend, the matter will first be presented to their underwriters, unless the valuation on the property makes it clear that they are satisfied with the lease term.
This seismic shift in attitude means that tens of thousands of leasehold properties across the UK may now be unacceptable for lending purposes for the Alliance & Leicester.
On previous blogs I noted that Lloyds have changed their minimum required lease term. However, this was only a relatively minor change of only a few years.
Alliance & Leicester are now making decisions on a case-by-case basis. This means that several leasehold owners may now be unable to obtain mortgages with one of the largest banks in the UK.
This should prompt many leaseholders with a remaining lease term between 50-70 years to think about extending their Lease.
I foresee freeholders becoming slightly more aggressive in the premiums they seek for lease extensions. This may lead to an increased number of lease extension premium determinations going before the Leasehold Valuation Tribunal.
There are only a limited number of conveyancing firms specialising in lease extensions. Therefore, if you are considering a lease extension to increase the marketability of your property, it would be wise to consult a specialist in this particular area of the law.