Unit 4 – Topic 13 Flashcards
Assessing the property
Lenders tend to avoid lending on freehold flats, because : (13.4)
A. there may be difficulties in renewing the freehold
B. there is a limited market for this type of property
C. it may be difficult to establish liability for commonly-owned parts of the structure
D. the owner can only acquire possessory title
C. it may be difficult to establish liability for commonly-owned parts of the structure
Many lenders are reluctant to consider mortgages on freehold flats. The reason for this is that the buildings invariably have common areas for which there is no clear accountability. For example, the ceiling of one person’s flat is another person’s floor, so it is unclear who is responsible for damage.
John is looking to purchase a residential property which has a long term tenant with a legal tenancy agreement. Which of the following events could be of concern to the lender ? (13.1)
A. John must remain as the landlord while the tenant is at the property.
B. The tenant is obliged to vacate the property when John completes on the purchase.
C. The tenant could gain an overriding interest in the property
D. The lender may need to collect from the tenant
C. The tenant could gain an overriding interest in the property
Few mortgage lenders will lend without vacant possession, because the occupant could gain an overriding interest in the property.
Leaseholders who wish to sell their property should consider an extension of the lease before the property is marketed, if the lease has less than: (13.5.1)
A. 20 years to run
B. 40 years to run
C. 60 years to run
D. 80 years to run
D. 80 years to run
A leaseholder who is considering selling a property with less than 80 years remaining on the lease should consider a lease extension before selling the property, or at least initiate the extension process in order to assign the right to the new owner.
Which of the following is correct in respect of a leasehold property? (13.5.1)
A. The value is likely to increase as expiry date approaches
B. The leaseholder is automatically entitled to purchase the freehold interest
C. The ground rent is paid by the freeholder to the leaseholder
D. A lender would usually specify that the term of the lease extends beyond the agreed mortgage redemption date by a certain number of years
D. A lender would usually specify that the term of the lease extends beyond the agreed mortgage redemption date by a certain number of years
Lenders generally insist that leasehold properties have a specified unexpired period on the lease after end of the mortgage term – typically, 30-40 years.
Which one of the following statements is true in relation to the Flood Re scheme (13.11)
A. The premium the insurer pays to Flood Re depends on how often the property has flooded in the past
B. Only properties built after 2009 are covered
C. All insurers must insure flood risk through the Flood Re scheme
D. The insurer may pass on the cost of its Flood Re premium in the premium it charges the property owner
D. The insurer may pass on the cost of its Flood Re premium in the premium it charges the property owner
The insurance company will assess the premium for insuring the property in the normal way, but may add the cost of their Floor Re premium to the homeowner’s premium and increase the excess accordingly
Billy has been told that he will have to pay a ‘marriage value’ when he extends the lease on his flat. Which of the following is true ? (13.5.1)
A. His lease must have at least 80 years left to run
B. The freeholder will be entitled to 50% of the marriage value
C. The marriage value will reduce as the term reduces
D. The value will be determined by negotiation with the freeholder
B. The freeholder will be entitled to 50% of the marriage value
If a lease has less than 80 years to run, the leaseholder will have to pay a premium and an additional ‘marriage value’ to extend the lease. The freeholder has a right to 50% of the marriage value.
Jordan is planning to buy a 2-bedroomed flat, for which he requires a mortgage loan. The flat has a sitting tenant who has a tenancy agreement with the seller, which means Jordan will: (13.1)
A. have to pay more to purchase the property
B. be turned down by most lenders
C. be required to take on the tenancy agreement
D. have to pay a higher lending charge
B. be turned down by most lenders
Some properties are sold with a sitting tenant, but few mortgage lenders will lend on properties without vacant possession, because the occupant could gain an overriding interest in the property.
Daphne and Donald are looking to purchase a flat above a delicatessen. When compared with a purpose-built flat, the couple should be aware that the flat they’re hoping to purchase is likely to be : (13.9)
A. more expensive, but more easily mortgageable.
B. less expensive, but more difficult to mortgage.
C. a similar price, but more difficult to mortgage.
D. less expensive, but more easily mortgageable.
B. less expensive, but more difficult to mortgage.
The multiple-use aspect of a property could have a detrimental effect on its value and some lenders may decline to lend.
Boris has owned his flat for six years and is now looking to sell it and buy
a new flat closer to his place of work. The lease on his current property has
55 years left to run, but Boris cannot afford the cost of an extension to the
lease. The short lease has deterred potential buyers, although a cash buyer has made a low offer. Which of the following options could be the most suitable for Boris ? (13.5.1)
A. Sell the property at auction
B. Start the extension process, with a view to assigning the right to the new owner.
C. Accept the cash offer
D. Borrow the money and pay for the lease extension
B. Start the extension process, with a view to assigning the right to the new owner.
A leaseholder, like Boris, who has an unexpired lease below a term of 80 years, could consider
extending the lease before selling, or starting the extension process with a view to assigning the right to the new owner
Which one of the following steps would a lender take with regard to the valuation of a period property ? (13.7.1)
A. Impose a higher interest rate
B. Consider the amount of similar property in the area
C. Request a special undertaking
D. Insist on a building survey
B. Consider the amount of similar property in the area
The amount of similar property in the area will have a bearing on its value. In an area where period property is rare, the value can increase and vice versa.
John lives in a residential property that is located in a flood risk area. Why might he not be eligible for the ‘Flood Re’ scheme ? (13.11)
A. He claimed for flood damage in 2008 on a previous property.
B. His current property was built in 2010.
C. He has already insured the property.
D. The area in which he lives suffered from flooding in 2017.
B. His current property was built in 2010.
To be eligible for the Flood Re scheme, the property must have been built before 1st January 2009, be residential, have a council tax band and be insured by the individual homeowner
