The Society of Licensed Conveyancers (SLC) has called on mortgage lenders to standardise the unexpired lease terms on which they will lend. This call has been made to halt a trend of requiring ever longer lease terms as a condition for granting a mortgage. Whilst there are still a good number of lenders that require a minimum unexpired lease term of 50 or 55 years, there are many that now require the term to be 80 or even 90 years and there does not appear to be any clear rationale for this.
Val Holmes, Chairman of the SLC said: ‘it used to be the case that mortgage lenders would offer mortgages for leasehold properties where the expiry of the lease would fall due more than 25 years after the term of the mortgage. In other words, if the mortgage term was 25 years, the unexpired portion of the lease would need to be a minimum of 50 years. We are now finding however that an increasing number of lenders are insisting on minimum lease expiry terms of 80 or even 90 years for no apparent reason. If this trend continues it has the potential to blight leasehold property owners by affecting leasehold property values. It also has the potential to cause chaos in the conveyancing process when a buyer is obtaining a mortgage with a lender who requires a minimum 80 years lease expiry, and the seller has an unexpired lease term which is less than this. The seller will then need to obtain an extension at considerable cost and delay, or lose their buyer’
Val added: ‘there are people who have suggested that this may have something to do with the inappropriate creation of leases on newbuild properties, but to our way of thinking that is a standalone issue and should not have any impact on the more conventional use of leases as a form of property title.’
The Society believes that the mortgage industry trade bodies should work with their members to address this issue and arrive at a framework for unexpired lease terms within which their members can operate.’
