The 78-Year Lease, the Insolvent Freeholder and the Lender's Retention

Cobalt's criteria are 80 years at completion or a documented extension. The lease has 78 years, so as things stand the loan is outside criteria. A statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993 would add 90 years and reduce the ground rent to a peppercorn, but the tenant must have owned the flat for two years before claiming; Daniel will not qualify immediately. The seller could serve a s.42 notice before completion and assign the benefit of the claim to Daniel, but the notice and assignment must be properly documented, and the freeholder is dissolved. On dissolution, the freehold reversion passes to the Crown as bona vacantia, so the Treasury Solicitor must be approached. If the landlord cannot be found, the court can make a vesting order under s.26 of the 1993 Act on an application by the tenant. That is not a six-week process. The unregistered 2016 deed of variation is a further problem: it should be noted on the lease register; if it is not, the lender may treat the pet restriction as still effective. Advise Daniel that completion without a lender-approved extension is unlikely; negotiate a price reduction or a delayed completion, and obtain Cobalt's written decision before exchange.

Routes: (a) Statutory lease extension: best long-term, 90 years added, peppercorn ground rent; requires two years' ownership, so the seller must claim and assign, or Daniel waits two years; with a dissolved freeholder, a s.26 vesting order is needed, which adds months and cost. (b) Non-statutory extension by deed with the Crown/Treasury Solicitor: quicker if the Crown will negotiate, but may require a premium and is not guaranteed; the deed must be registered. (c) Collective enfranchisement with other flat owners: the residents' association is not a recognised RTE company and there are no accounts; the freeholder is dissolved; this is complex and slow. (d) Lease variation to remove the ground rent doubling: does not solve the 80-year requirement. Advise that the statutory route is the only reliable way to achieve a mortgageable 80-plus-year lease, but it cannot complete in six weeks. The practical choices are: exchange with a special condition and a retention pending the s.26 application; or reduce the price to reflect the short lease and accept a specialist lender; or walk away. Daniel must understand that a 78-year lease with 22 years to the 80-year threshold will become harder to sell.

Draft: (1) Condition precedent: completion is conditional on Cobalt issuing a formal mortgage offer on terms acceptable to the buyer, and on the seller procuring registration of the 2016 deed of variation at HM Land Registry before completion. (2) Lease extension: the seller is to serve a s.42 notice before exchange, assign the benefit to the buyer on completion, and provide copies of all correspondence; the seller is to co-operate with any s.26 application at its own cost. (3) Service charges: the seller is to provide a statutory declaration that no service charge demands are outstanding and to disclose the residents' association accounts; retention of £15,000 from the purchase price for six months against unknown liabilities. (4) If the lender refuses to lend on the title, the buyer may rescind and recover the deposit in full, with neither party liable for further claims. (5) The seller gives full title guarantee and vacant possession; ground rent and service charges are apportioned to completion. (6) The buyer's solicitor is to be responsible for registering the transfer, charge and deed of variation, with the seller's reasonable co-operation.