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Our client, a portfolio landlord, found a residential flat in London at £184,000 which was significantly below its open market value. The discount came down to the lease, which had 56 years remaining on it. The freeholder had agreed to extend it to 146 years simultaneously on completion for a premium of £53,000, giving the property a post extension value of £325,000.
The challenge was finding a lender willing to lend against that higher post extension figure and fund the lease extension cost on top of it.
The Problem
Most lenders would only consider the day one value of a short lease property. With a 56 year lease, standard lending criteria could not be met. The client needed a lender who could look beyond the current position, lend against the GDV and move quickly enough to secure the deal.
The Solution
After working through our lender panel, we found a specialist lender willing to lend against the post extension GDV of £325,000 on an exception basis. The loan was structured at 75% of the purchase price plus 100% of the £53,000 lease extension premium, paid simultaneously on completion and funded in full within the facility. We managed the process throughout and completed within six weeks.
The Results
- £243,000 net loan secured
- 75% of purchase price plus 100% of lease extension cost
- 0.85% pcm fixed rate
- 0% exit fee
- 12 month term
- Exit via refinance onto term debt
The client purchased a property at £184,000 that is now worth £325,000 following the completion of the lease extension, with 100% of the extension cost funded within the deal.
If you are working on a lease extension opportunity and need a lender who can fund against the uplift, get in touch with us.
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