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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9348
Experience:  I have been practising for 30 years.
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I have an interest-only mortgage on my leasehold flat,

Resolved Question:

I have an interest-only mortgage on my leasehold flat, bought in September 2006, which has 5 years left to run. I have been making regular capital over-payments and although I am having to budget carefully and restrict my spending, I should be able to pay off the full amount at the end of the term. Also I have been retired for nearly 2 years, after 10 years of ill-health and sporadic work. However, last week a new freeholder took ownership of the ground floor flat below and during our first phone conversation he advised me to extend my lease as it 'only had 71 years left to run'. This would cost me about £20,000. I had never heard anything about this before and also thought I had 80 or more years left to run, plus I was sure when I bought the flat the lease had about 96 years to run. I went through all the documents relating to my purchase and found the initial Mortgage Valuation Report and on the first page it stated 'Leasehold unexpired term: 96 years'. When I checked the date of the lease it said 28th April 1988, which when I calculated it does indeed expire in 71 years. If the correct number i.e. 'Leasehold unexpired term:81 years' had been put on the initial valuation report would the mortgage company had advised me differently and either suggest i) ask the seller to extend the lease before buying the flat, ii) ask for a reduction in price to reflect the shorter lease, iii) I extend the lease after I've had the flat for 2 years or iv) advise not to even buy it? Do I have any recourse against the mortgage company who made this mistake, leaving me with a £20,000 bill I have no hope of paying? Can you offer any advice please.
Submitted: 9 months ago.
Category: Law
Expert:  F E Smith replied 9 months ago.

When you bought the flat in 2006, 10 years ago, there were 81 years left to run.

What did the solicitors report on the lease say about the number of years left on the lease?

Do you now want to sell the property or remortgage it?

Customer: replied 9 months ago.
Thank you for your reply and further questions. I have just re-read all the other documents I have: Sellers Leasehold Information Form, Sellers Property Information Form which includes a OneSearch Direct search certificate, plus a copy of the Land Registry Entries and there is no mention of the length of the lease nor a suggestion that I would ever need to pay for an extension. I do not want to sell the flat and I understand that as I'm retired I'm unlikely to be allowed to remortgage it.
Expert:  F E Smith replied 9 months ago.

Thank you.

If you don’t want to sell the flat, and you going to live in it until you shuffle off the mortal coil, you can just let the lease reduce in the unexpired term and then let whoever inherits the property after you die, deal with a lease extension. The landlord cannot compel you to extend the lease.

A mortgage lender will not normally lend on a mortgage with less than 70 years left on the lease but that wouldn’t be your problem.

Can I clarify anything for you? Please rate the service positive so that I get paid. We can still exchange emails. Best wishes. FES.

Customer: replied 9 months ago.
Thank you for your further comments, although you don't say whether I do have any recourse over the mortgage provider's mistake. At present I don't want to sell the flat, but I can't be sure what I might want/need to do over the next 20-30 yrs, e.g. sell to help pay off the mortgage and/or to downsize. I wouldn't want to find that the flat's then difficult to sell or undervalued because of the shorter lease.
Expert:  F E Smith replied 9 months ago.

It would not be the mortgage providers mistake, it could be either your solicitors mistake or the value is mistake.

The flat will be more difficult to sell with a shorter lease because it will need extending and hence, the valuation would be lower unless it is extended.

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