UTB was approached to assist a customer purchasing a flat with a remaining lease of just 2 years. The purchase price was £400,000 and the cost of extending the lease by another 125 years was also £400,000. However, with the lease extended, the flat would be worth in the region of £1.3m.
Using the same criteria we would use for a Below Market Value deal (minimum 10% net contribution) we were able to advance the client 90% net of the purchase price (£360,000) plus all the money required to extend the lease (£400,000).
As we were happy to work on the £1.3m end value, UTB provided 95% net of the overall funding required, with the borrower only providing 5%.
When the transaction was complete and the lease extended, the client simply refinanced out on a term mortgage at c70% LTV to exit the bridge.
As in this case, it is very unlikely a client has the cash reserves available when a lease extension is that much money, meaning traditionally only a cash buyer could take advantage of such an opportunity. Now you know UTB offer the expertise and the funding to provide solutions to short leases.