Controlling costs - what you need to know

Unless you have the necessary cash available, flat owners will need to raise money to finance the purchase of the lease extension or share of freehold. Traditionally, the easiest way of doing this was to contact your existing mortgage lender and either take a further advance or re-mortgage your existing loan, increasing it to raise the extra cash.

However, the liquidity squeeze means lenders are favouring lower loan-to-value (LTV) business over high LTVs of 90 per cent or more, which they regard as higher risk. If the cost of extending the lease takes your total LTV to unacceptable levels as far as the lender is concerned, you could consider simultaneously extending the lease when you draw the re-mortgage so that it is based on the value of the property with the lease extended and not the value of the property pre-lease extension.

In an ideal world, every flat owner would participate in the enfranchisement of the block but quite often there are lessees who won’t want to take part. The price payable for the freehold is the sum of the premiums for all the flats, even those who choose not to participate. This means participants have to cover the cost of non-participants, which can be prohibitively expensive and threaten the enfranchisement taking place at all.

In happier times, various specialist funds were available providing non-participant finance at no cost to participants or non-participants. These options have now narrowed but there is still the opportunity for participants to raise finance to purchase the additional share against their own properties.