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    • MSE Jenny
    • By MSE Jenny 1st Mar 12, 3:18 PM
    • 1,218Posts
    • 3,554Thanks
    MSE Jenny
    Extend Your Lease guide discussion
    • #1
    • 1st Mar 12, 3:18 PM
    Extend Your Lease guide discussion 1st Mar 12 at 3:18 PM



    Hi all, we've written a new Extend Your Lease guide to help you extend at a fair price.

    How did you find the info? If you've done it, how did it go and do you have any other tips you'd add? How much value do you think it added to your property?

    Thanks
    for your help!


    MSE Jenny

    Last edited by MSE Jenny; 02-03-2012 at 12:59 PM.
Page 30
    • da_rule
    • By da_rule 16th Aug 17, 6:10 AM
    • 2,503 Posts
    • 2,228 Thanks
    da_rule
    Always add the max you can, 99years. Speak to a solicitor. If you add 30 years, before you know how t, you're back to square one.

    It's your right to add 99 years, the price difference is not much.
    Originally posted by Nnenne1
    It's actually 90 years under the Act, not 99.
    • strawberries1
    • By strawberries1 16th Aug 17, 10:41 AM
    • 657 Posts
    • 139 Thanks
    strawberries1
    Whatever you do, don't go the informal route. Go to the tribunal. http://www.leaseholdknowledge.com/informal-lease-extensions-are-pure-poison

    http://lawingov.org.uk/forum/onerous-ground-leases
    • amal
    • By amal 16th Aug 17, 11:46 AM
    • 6 Posts
    • 6 Thanks
    amal
    I can't see how the current system is fair. The freeholders profit is described as "compensation of loss of reversion". It is only a loss if there is a right to recover the lease in the first place. There is NO automatic right to recover the lease. There is only the fortune (and exploitation) of recovering a lease in circumstances where leaseholders are slow to carry out an administrative task which exercises their own rights.

    There are 12 families, in a block of 20, facing diminishing value of our homes. Homes we paid a premium price, believing we could re-sell at market value within our life time. We are all trapped as each year the cost of renewal moves even further away from our means.

    I would urge all leaseholders to participate in the gov consultation. This is an online survey (it is yes/no for the main part and the link can be found by searching "government consultation unfair practices in leasehold market") and at Q21 ask the Government to overturn Mundy and prescribe relativity according to the Parthenia model. It will only take a couple of mins to complete.
    • strawberries1
    • By strawberries1 16th Aug 17, 2:13 PM
    • 657 Posts
    • 139 Thanks
    strawberries1
    Further information about doubling ground rents, extending the lease term by the informal route compared to statutory route
    https://barcode1966.wordpress.com/2015/04/07/the-truth-about-informal-lease-extensions/

    Consultation ends 19 September 2017.

    https://www.surveymonkey.co.uk/r/leaseholdhouse

    email: LeaseholdHousesConsultation@communities.gsi.gov.uk
    • da_rule
    • By da_rule 16th Aug 17, 4:55 PM
    • 2,503 Posts
    • 2,228 Thanks
    da_rule
    There is NO automatic right to recover the lease. There is only the fortune (and exploitation) of recovering a lease in circumstances where leaseholders are slow to carry out an administrative task which exercises their own rights.

    There are 12 families, in a block of 20, facing diminishing value of our homes. Homes we paid a premium price, believing we could re-sell at market value within our life time. We are all trapped as each year the cost of renewal moves even further away from our means.
    Originally posted by amal
    No one has said that there is a right to recover the lease. There is however, once the lease determines, a right for the Freeholder to recover the property that was leased (since the lease has ceased to exist, the lease itself cannot be recovered). Albeit after the service of the relevant notices and potentially obtaining a court order, in the same manner as ending other forms of residential tenancies.

    In relation to the second point, surely this is explained during the conveyancing process? I can still hear my lecturer saying in one of the very first conveyancing classes we had that "a lease is a wasting asset" (meaning that over the term of the lease it wastes away to nothing). He also implored us to thoroughly explain the consequences of this to our clients when in practice.

    As you have pointed out, there is a route to extend the lease (regardless of anyone's views on the cost of the process). But also as you point out, when the lease is allowed to run down below the marriage fee limit the extension could prove to be prohibitively expensive. This can also mean that the property is difficult to sell and will also have an impact on the value. However, all of this should, in my opinion, form part of the initial advice given to you by a solicitor when you purchase a leasehold flat. There should be an assumption that the lease won't be extended (either because of expense or through inaction) and the advice should be given accordingly.

    Ask yourself, if when you purchased the property you had been told that the lease extension process existed and that if the length of the lease drops below 80 years it would become increasingly and prohibitively expensive to renew and have a negative impact on the saleability and value of the property, would you have still purchased? I'm assuming that you weren't clearly and expressly told the above during the conveyancing process?
    • amal
    • By amal 16th Aug 17, 8:24 PM
    • 6 Posts
    • 6 Thanks
    amal
    I was in no way aware of the cost of missing a date to carry out an administrative exercise. I've not heard any logic behind a "marriage value" and why it is used to penalise leaseholders disproportionately for failing to act sooner. Freeholders do not have a right to reversion, it is only a default. This default is exploited unfairly through the increasing costs on leaseholders through tribunal costs and arbitrary marriage valuations designed by agents to the freeholders. If, as you say, the system is fair, the costs of leasehold extensions would be reflected in both the sale of Leaseholds over 80yrs (discounted to reflect the cost of error to Renew) as well as the price of the freehold - It is not.
    • miller3653
    • By miller3653 8th Sep 17, 10:53 PM
    • 6 Posts
    • 3 Thanks
    miller3653
    How does the cost calculation change to extend the lease, when the Ground Rent increases by 150% every 10 years?
    Last edited by miller3653; 08-09-2017 at 10:54 PM. Reason: Missed word out!
    • da_rule
    • By da_rule 9th Sep 17, 7:21 PM
    • 2,503 Posts
    • 2,228 Thanks
    da_rule
    How does the cost calculation change to extend the lease, when the Ground Rent increases by 150% every 10 years?
    Originally posted by miller3653
    It is included in the premium, essentially as 'lost income' for the freeholder.
    • miller3653
    • By miller3653 9th Sep 17, 8:26 PM
    • 6 Posts
    • 3 Thanks
    miller3653
    So how is the calculation made? Also our Freeholder has sold on the rights to the Ground Rent to a third party, so as far as I am aware there is no lost income for the Freeholder.
    • da_rule
    • By da_rule 10th Sep 17, 8:20 AM
    • 2,503 Posts
    • 2,228 Thanks
    da_rule
    That doesn't matter, he would probably have to buy himself out of the contract with the third party.

    In terms of how it is calculated, you simply add all of the yearly ground rents together (including the increases) to get a sum. So if there was 10 years left (ignore the marriage value implications) and the ground rent was £50 doubling each year the rents would be:
    £50
    £100
    £200
    £400
    £800
    £1600
    £3200
    £6400
    £12800
    £25600

    Therefore the amount to be added the the premium would be the sum of all this (which I make to be around £51,000). So for yours you need to just work out how much ground rent is due over the remainder of the lease based on the ground rent increases.
    • miller3653
    • By miller3653 10th Sep 17, 9:00 AM
    • 6 Posts
    • 3 Thanks
    miller3653
    Thank you for your reply, but for us that's pretty scary! Our current ground rent is £500 it rises by 150% every 10 years and we have got 240 years on the lease! The purpose of exploring the lease extension would be to reduce the ground rent required as I understand it would drop to a peppercorn rent. The exponential rise in ground rent takes the final cost into millions!!
    • eddddy
    • By eddddy 10th Sep 17, 5:01 PM
    • 5,439 Posts
    • 5,119 Thanks
    eddddy
    That doesn't matter, he would probably have to buy himself out of the contract with the third party.

    In terms of how it is calculated, you simply add all of the yearly ground rents together (including the increases) to get a sum. So if there was 10 years left (ignore the marriage value implications) and the ground rent was £50 doubling each year the rents would be:
    £50
    £100
    £200
    £400
    £800
    £1600
    £3200
    £6400
    £12800
    £25600

    Therefore the amount to be added the the premium would be the sum of all this (which I make to be around £51,000). So for yours you need to just work out how much ground rent is due over the remainder of the lease based on the ground rent increases.
    Originally posted by da_rule
    That's not correct.

    You have to apply a discount rate to future ground rent payments - it's a bit like the inverse of an interest rate, or an inflation rate.

    I'm no expert on this, but I believe the discount rate that's often used may be 7% per year.

    So if your lease says you have to make a ground rent payment of £10,000 for the year 2117 (i.e. in 100 years), that's equivalent to paying your freeholder compensation of £11.52 today.

    And if you have to make a ground rent payment of £10,000 for the year 2217 (i.e. in 200 years), that's equivalent to 1.3p today.
    • miller3653
    • By miller3653 10th Sep 17, 5:49 PM
    • 6 Posts
    • 3 Thanks
    miller3653
    That sounds better!!! I will take it up with an expert in the field to help take this forward and give me n accurate valuation, but I really welcome the input.
    • Daywalk3r
    • By Daywalk3r 19th Sep 17, 12:18 PM
    • 1 Posts
    • 0 Thanks
    Daywalk3r
    Advice for London Flat
    Hi all.

    Grateful for your advice. We've got 97 years left on our ex-council flat in East London. Not quite sure how many years we'll stay before selling and moving out ..maybe in about 6 years time in 2024 when we'll have 90 years left on our lease.

    Is it worth it for us to apply for a lease extension now or wont it make much difference to the selling price when/if we sell in about 2024 with 90 years still left?

    Thanks
    • strawberries1
    • By strawberries1 20th Sep 17, 4:46 PM
    • 657 Posts
    • 139 Thanks
    strawberries1
    I'm in the middle of purchasing a property with GR doubling every 25yrs with 120yrs left. For the next 20years of the Term £250 per annum
    For the next 25years of the Term £500 per annum
    For the next 25years of the Term £1000 per annum
    For the next 25years of the Term £2000 per annum
    For the remainder of the Term £4000 per annum

    This info came up at the enquirires state ie after my offer. The surveyour suggests I ask for a reduction if I still want to go ahead.
    • BenRobinson20
    • By BenRobinson20 10th Oct 17, 9:46 PM
    • 1 Posts
    • 0 Thanks
    BenRobinson20
    First time buyer - lease extension query
    Hi,

    We are first time buyers looking to buy in London. We are looking at a £400,000 ex local authority flat with a £10 ground rent.

    The lease has 97 years remaining on it. General guidance we have been given has been not to look at flats with less than 100 years left on the lease. Which appears to be easier said than done with our budget in London.

    My question is - is this in the territory where the lease length will begin to cause us problems if we looked to sell in say 5-7 years? Given the size of our mortgage I don't want to be putting ourselves in additional risk.

    Thanks
    Ben
    • keveen
    • By keveen 17th Oct 17, 9:20 PM
    • 115 Posts
    • 65 Thanks
    keveen
    Unless you can negotiate a long lease before you buy you will end up paying a small fortune once you become the "owner". (Remember you are not the owner, you are basically renting.) I think the recommended minimum term is 125 years.
    Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam
    • keveen
    • By keveen 17th Oct 17, 9:23 PM
    • 115 Posts
    • 65 Thanks
    keveen
    I'm in the middle of purchasing a property with GR doubling every 25yrs with 120yrs left. For the next 20years of the Term £250 per annum
    For the next 25years of the Term £500 per annum
    For the next 25years of the Term £1000 per annum
    For the next 25years of the Term £2000 per annum
    For the remainder of the Term £4000 per annum

    This info came up at the enquirires state ie after my offer. The surveyour suggests I ask for a reduction if I still want to go ahead.
    Originally posted by strawberries1
    Probably because if you default on your groundrent payment the freeholder can repossess your flat when the groundrent is £250 a year (nice law!). That is one reason why they do it, hoping to catch you out.
    Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam
    • keveen
    • By keveen 17th Oct 17, 9:31 PM
    • 115 Posts
    • 65 Thanks
    keveen
    If you buy a leasehold property you do not own it, the freeholder owns it. Leasehold has become toxic, especially when it is a house.

    The biggest issue is the existence of leasehold itself and how it affects people already on leases past and present. Millions are trapped into an ever declining asset when their lease term is less than 99 years and they find they can't afford to buy the freehold. When they bought their house, most people had no idea that Leasehold made them a tenant and that the landowner could and would eventually take their from home from them. I think most of them just thought it meant you had pay some groundrent. Nobody told them the reality otherwise who would buy a house on those terms! The law has been slightly modified after scandals in the 60s when many homes were legally but unjustly repossessed, supposedly redressing this imbalance but in fact the landlord still wins every time as the costs involved in disputes are enormous and many ordinary people cannot afford them. The leaseholder for example has to pay the freeholders legal bills!!
    And now recently a new level of exploitation and imbalance has been created by builders selling leasehold homes rather than freehold with costs and clauses that are unnecessary and costly, with huge new groundrents that increase over time and make the house unsellable. In addition there are clauses demanding large payments for making even small alterations to your own home. And the final scam is the selling of the said freeholds to investment companies that then demand even more money and an outrageously inflated new price for buying the freehold that new home buyers thought they could buy after 2 years. It is all "legal" but grotesquely unjust, exploitative and must end. Leasehold must be abolished as it has been in Scotland.

    https://www.ft.com/content/d284bf04-e472-11e6-8405-9e5580d6e5fb
    https://www.leaseholdknowledge.com/leasehold-houses-last-got-scandal-ground-rents-nations-consciousness-much-worse

    https://www.ft.com/content/d284bf04-e472-11e6-8405-9e5580d6e5fb
    https://www.leaseholdknowledge.com/leasehold-houses-last-got-scandal-ground-rents-nations-consciousness-much-worse
    Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam
    • GTG
    • By GTG 17th Oct 17, 11:55 PM
    • 419 Posts
    • 54 Thanks
    GTG
    Hi Ben,

    You should not have any problem selling a leasehold flat with good title until the lease is approaching an unexpired term of less than 80 years. I say a problem but even then it is not a problem, please read on.

    To extend a lease that has less than 80 years to expiry incurs what is called a "marriage value" In this case, the leaseholder has to compensate the freeholder with the loss of 50% of the difference between what the flat would be valued as if it was leasehold property and the diminished value of a short lease. Also, owing to this, the number of lenders begins to decline as the lease runs down. Some lenders will not lend at all below 70 years, It follows that competitive deals on mortgages also decline. I am not up to date with the mortgage industry but I think it will be a safe bet to say that 65 and below then no mortgage will be available. Not that this will affect you of course.

    You should be fine if you plan to sell in 5-7 years time. The ground rent of £10 is excellent and if there is a clause to escalate this unreasonably then if your solicitor is doing his/her job properly he/she will advise you. I would advise anyone buying a leasehold property to do their due diligence on their prospective landlord to see if they have any "form" i.e. unfair treatment of leaseholders. Having said that, in my opinion, local authorities are probably the safest organization to have as your landlord. We probably all abhor how inefficient and corrupt they are but they will comply with the law with regard to being a landlord. In the unlikely event that they stray, then as a council tax payer, you will have the system of local government democracy should soon bring them back on track. Not to mention your statutory rights as a long leaseholder.

    Lastly, people become victims of rogues in any industry but more often than not the common theme as to why is because they fail to invest a little time in doing some due diligence. Just as you are doing here Ben. Some people would rather spend more time watching soaps or x-factor etc on the telly than on due diligence on a purchase that is going to take a substantial percentage of their salary over the subsequent 25 years.
    Last edited by GTG; 18-10-2017 at 12:05 AM.
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