Last minute problem with lease extension

[B2L Newbie]

Hi there,

I’d really appreciate some advice with this one.  I’ve been about to exchange on a leasehold property for the last few weeks and a last minute problem has risen with the lease extension.

The lease was 89 years and it’s been extended to 999 years however it hasn’t been registered as yet with the land registry, despite in being started a year ago.  The process has been expedited but, despite indications otherwise from my solicitor, it looks as though it’ll go on beyond my current mortgage offer which runs out on Thursday(!).

A new title number has been raised but it’s not been completely registered.  The management company who own the freehold is made up of the owners of a set of nine properties of which this property is one of.  A few of the properties got together to process this a while ago.

The vendor, who does seem trustworthy, assured me there’s no risk to proceeding.     They’ve said that all the legal documents prove that the lease extension has been submitted and paid for  and will go through just not in time for the transaction.

I’d be grateful for some advice here.  Is it a problem that it’s still awaiting registration with the land registry?  I’ve negotiated a good price on the property and I’d really want it to go through but don’t want to make a stupid mistake.

Many thanks

Paul

 

[Kerry Chan]

Hi Paul

This doesn't seem like a last-minute issue - I suspect that your conveyancing solicitors have not managed this transaction properly.

Even if you are comfortable going ahead, there is a question as to whether your lender would be happy to go ahead with lease that has only got 89 years left.  Have you checked your offer / lender's policy about this?

In addition, have you tried extending the mortgage offer with your lender first?  Assuming you got your mortgage offer six months ago, it is not unusual to extend for another three to six months (so the mortgage offer lasts for nine months to one year in total).

You mentioned that the process started one year ago.  Was this referring to the extension process or the actual registration process at the Land Registry?  The Land Registry takes over a year to register these days.  Having said that, the Land Registry has a fast-track process, which is available for transactions where delay of registration may put a sale at risk.  Have your solicitors contacted the Land Registry to request this fast-track process in the last few weeks?  Once this fast-track process is triggered, it usually takes about 10 working days for the Land Registry to complete the registration.

11 hours ago, B2L Newbie said:

The vendor, who does seem trustworthy, assured me there’s no risk to proceeding.     They’ve said that all the legal documents prove that the lease extension has been submitted and paid for  and will go through just not in time for the transaction.

Given the conflict of interests, I wouldn't personally trust the vendor, unless your solicitors have given you a legal opinion confirming this is the case, particularly since leasehold extension could get complicated and costly.

Hope the above is helpful.

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.

Kerry

[B2L Newbie]

5 hours ago, Kerry Chan said:

Hi Paul

This doesn't seem like a last-minute issue - I suspect that your conveyancing solicitors have not managed this transaction properly.

Even if you are comfortable going ahead, there is a question as to whether your lender would be happy to go ahead with lease that has only got 89 years left.  Have you checked your offer / lender's policy about this?

In addition, have you tried extending the mortgage offer with your lender first?  Assuming you got your mortgage offer six months ago, it is not unusual to extend for another three to six months (so the mortgage offer lasts for nine months to one year in total).

You mentioned that the process started one year ago.  Was this referring to the extension process or the actual registration process at the Land Registry?  The Land Registry takes over a year to register these days.  Having said that, the Land Registry has a fast-track process, which is available for transactions where delay of registration may put a sale at risk.  Have your solicitors contacted the Land Registry to request this fast-track process in the last few weeks?  Once this fast-track process is triggered, it usually takes about 10 working days for the Land Registry to complete the registration.

Given the conflict of interests, I wouldn't personally trust the vendor, unless your solicitors have given you a legal opinion confirming this is the case, particularly since leasehold extension could get complicated and costly.

Hope the above is helpful.

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.

Kerry

Hi Kerry,

Thank you so much for your detailed and informed response.  Yes, sadly, I agree that my conveyancer has been very poor to say the least.  I certainly wouldn’t use them again.

I’m uncertain as to exactly when the registration process was started with the land registry.  The vendor has been critical of the solicitor they used but it might be the case that, as you say, the process is incredibly lengthy.  I’ve been advised that it has been expedited twice (if that’s possible) but this was the week before Christmas.  My conveyancer said it would be registered on 28/12 but nothing has materialised.  The vendor told me on Friday that it was expedited on 23/12 which means that 10 working days (minus all the bank holidays) takes us to Wednesday which is the day before my mortgage expiry(!).  Do the land registry guarantee the 10 working day process?  Is there anyway of checking this will be done?  I’m in contact with the vendor who I feel can chase this up but neither of us are that well informed of the options..

Re the possible mortgage extension; I have contacted my mortgage broker who will follow this up on Monday.  Again, I fear we might be too late to arrange an extension?  With my conveyancer suggesting that it will get sorted I’ve thought I wouldn’t need one until it started to look less and less hopeful.  How long do lenders tend to take to make decisions regarding extensions?  And how likely are they to grant them?  I’ve got a really good interest rate, which is well below the current base rate so I wonder whether they’d be that motivated to assist as the terms are less favourable to them?

Thanks again for your help.  I understand that you’re not providing legal advice.  I really appreciate your suggestions/tips as a friendly observer.

Many thanks 

Paul

[Kerry Chan]

Hi Paul

9 hours ago, B2L Newbie said:

I’m uncertain as to exactly when the registration process was started with the land registry.  The vendor has been critical of the solicitor they used but it might be the case that, as you say, the process is incredibly lengthy.  I’ve been advised that it has been expedited twice (if that’s possible) but this was the week before Christmas.  My conveyancer said it would be registered on 28/12 but nothing has materialised.  The vendor told me on Friday that it was expedited on 23/12 which means that 10 working days (minus all the bank holidays) takes us to Wednesday which is the day before my mortgage expiry(!).  Do the land registry guarantee the 10 working day process?  Is there anyway of checking this will be done?  I’m in contact with the vendor who I feel can chase this up but neither of us are that well informed of the options..

I think the vendor would be more appropriate to follow up with the Land Registry (while keeping your conveyancer copied), but given the urgency, both you and the vendor might well need to put pressure on your respective conveyancer to follow up with the Land Registry.  They might need to call the Land Registry to get an update (and, if appropriate, follow up in writing afterwards).

Unfortunately, as with most governmental processes, they do not guarantee.  The 10-working-day period is more a statistical outcome.  Having said that, I asked my solicitors to use the fast-track process before and I got the registration within 5 working days, so it's situation-dependant.

9 hours ago, B2L Newbie said:

Re the possible mortgage extension; I have contacted my mortgage broker who will follow this up on Monday.  Again, I fear we might be too late to arrange an extension?  With my conveyancer suggesting that it will get sorted I’ve thought I wouldn’t need one until it started to look less and less hopeful.  How long do lenders tend to take to make decisions regarding extensions?  And how likely are they to grant them?  I’ve got a really good interest rate, which is well below the current base rate so I wonder whether they’d be that motivated to assist as the terms are less favourable to them?

This is a bit of a recent circumstances - the mortgage offers with good rates are only just starting to expire, so I can't really give you a view based upon experience on this.  Thinking about this logically, I am inclined to agree with you, since the new interest rates would be more favourable to the lender.  Though, I think your mortgage broker would more likely be able to give you a realistic view, particularly since (even if they haven't dealt with these before) they may know other brokers who have dealt with some cases like this.

There is one additional complication, even if you manage to exchange before your mortgage offer expires, lenders have processes in terms of drawing funds - they usually require 5-working-day notice.  This means that your mortgage offer may still be expired prior to completion - you do not want to exchange (unconditionally) without knowing for sure that funds could be drawn - otherwise, you may end up being liable to pay the vendor the full purchase price.  You should ask your broker to help see whether anything could be done in relation to the lender's funds drawing process (this should be covered by the mortgage extension in any case).  If the lender may take time to respond, and the registration issue is resolved in time, you might want to exchange subject to mortgage, so that this risk is mitigated.

Feel free to get in touch if you think it may be helpful.

Kerry

[B2L Newbie]

1 hour ago, Kerry Chan said:

Hi Paul

I think the vendor would be more appropriate to follow up with the Land Registry (while keeping your conveyancer copied), but given the urgency, both you and the vendor might well need to put pressure on your respective conveyancer to follow up with the Land Registry.  They might need to call the Land Registry to get an update (and, if appropriate, follow up in writing afterwards).

Unfortunately, as with most governmental processes, they do not guarantee.  The 10-working-day period is more a statistical outcome.  Having said that, I asked my solicitors to use the fast-track process before and I got the registration within 5 working days, so it's situation-dependant.

This is a bit of a recent circumstances - the mortgage offers with good rates are only just starting to expire, so I can't really give you a view based upon experience on this.  Thinking about this logically, I am inclined to agree with you, since the new interest rates would be more favourable to the lender.  Though, I think your mortgage broker would more likely be able to give you a realistic view, particularly since (even if they haven't dealt with these before) they may know other brokers who have dealt with some cases like this.

There is one additional complication, even if you manage to exchange before your mortgage offer expires, lenders have processes in terms of drawing funds - they usually require 5-working-day notice.  This means that your mortgage offer may still be expired prior to completion - you do not want to exchange (unconditionally) without knowing for sure that funds could be drawn - otherwise, you may end up being liable to pay the vendor the full purchase price.  You should ask your broker to help see whether anything could be done in relation to the lender's funds drawing process (this should be covered by the mortgage extension in any case).  If the lender may take time to respond, and the registration issue is resolved in time, you might want to exchange subject to mortgage, so that this risk is mitigated.

Feel free to get in touch if you think it may be helpful.

Kerry

Thanks once again Kerry for taking the time to reply 🙂.  It certainly is nerve racking.

I’ve suggested to the vendors that they’ll need their solicitors to chase this with urgency.  I’ll say the same to my conveyancer.

I believe the mortgage money is due to arrive with my conveyancer tomorrow as it’s been prearranged.  I’m uncertain of the impact of the funds arriving?  My mortgage broker is aware of the situation and I suspect he’ll be able to advise tomorrow.

It’s been really helpful to have your steer on the situation.

Paul

 

[Kerry Chan]

Hi Paul

The arrival of the funds is likely going to mean that you would be liable to pay interest already.  While it depends on the lender and the detailed terms, chances are that even if there is a grace period, the window would likely be short.

I am slightly surprised that your solicitors have requested the mortgage money already.  Does that mean your solicitors are comfortable that the leasehold extension is all in order (even if it hasn't been fully registered) and the property has good title and is within the lender's policy (even without the leasehold extension)?

Hope your discussions went well and this transaction is moving ahead.

Kerry

[B2L Newbie]

Thanks Kerry.

The money was returned to the lender as it had been arranged for completion today.  I’ve been advised that no interest would be due.

My conveyancer has been more helpful this week and explained the situation clearly.  She still needs to check out the exact status of the lease extension to ensure that no specific problems have been raised with it.  We’re both assuming that it’s simply a case that the land registry haven’t got to it yet.  
 

She’s reassured me that, given that the management company in ownership of the freehold is formed by the owners of the property, that most of the risks are vastly reduced.  The lender is also happy to lend as the current lease is over 55 years.

With the current mortgage deal expiring on Thursday it’s getting really tight.  We’re currently waiting to see if an extension comes through on the mortgage or if the registration of the lease extension happens before Thursday.  If neither take place then my conveyancer has suggested that proceeding only brings a very tiny risk.  She’s told me that I’d have the second priority in terms of registration on the title.  The extension ought to come through fairly soon which would then mean I assume the first priority position and we’d be back to where we should be post transaction. 
 

She’s online the following risks:

- potential significant delay if an enquiry/issue is raised with the initial extension application and not responded to by the current vendors solicitor (they’d not be motivated to facilitate the extension beyond what they’ve done already should their client have already sold the property).  This could culminate in the extension being rejected.  I ought to easily reapply but this might be a cost to me.

- that if for some strange reason my solicitor failed to renew my application with the LR once a lengthy time period had elapsed and it had still not registered due to the delay.  She’s assured me they getting numerous warnings ahead of this happening and therefore is highly unlikely to occur.

- if I needed to sell the property in the next couple of years and neither registration had gone through at the LR.  This would mean I’d be unable to expedite the extension (first priority) application application as I hadn’t made it.  Given that I’m be second in line I’d have to wait it out.  I’m assuming that something major would have to happen to mean that the extension hasn’t be resolved or rejected by then.

Is there anything that I haven’t thought of?  I’m hoping that this all makes sense - in that I’ve understood the situation correctly?!

Best wishes

Paul