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    • tomryan89
    • By tomryan89 13th Mar 17, 9:03 PM
    • 21Posts
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    tomryan89
    Unfair Lease Extension Offer
    • #1
    • 13th Mar 17, 9:03 PM
    Unfair Lease Extension Offer 13th Mar 17 at 9:03 PM
    Hi All - just looking for some feedback from others experiences, guidance or sympathy!

    We feel a bit hard done by at the moment, we bought our flat a few years ago when it had an 86 year lease. Being young and naive we took the estate agents word that this wasn't a big deal and our Solicitor was a bit crap. We should have done our own research though.

    We really want to sell out flat so that we can move forward with a house we love and have an offer accepted on. Our flat is on the market, and again being young a naive, assumed extending the lease would be easy. We've told out estate agent that we will sell it with a newly extended lease and it is being marketed as such.

    I approached the company managing the freehold (pier management) to enquire about the lease extension. They've sent me back an email offering to extend the lease for £13,900 and to increase the ground to £350 a year increasing with RPI every 5 years.

    Firstly, that is an obscene amount of money and secondly our Solicitor (instructed after I realised this whole process is very complicated) says that the ground rent offer would be a big problem for any potential mortgage provider.

    How is this even fair? Make the ground rent so rediculous that we couldn't even sell the flat?!

    Now I'm stressed out a little - how am I going to be able to sell the flat when our Solicitor says if we want to reduce we will need to use the appeal process which can take a year?

    Any thoughts ?
Page 1
    • Hoploz
    • By Hoploz 13th Mar 17, 9:11 PM
    • 3,495 Posts
    • 3,075 Thanks
    Hoploz
    • #2
    • 13th Mar 17, 9:11 PM
    • #2
    • 13th Mar 17, 9:11 PM
    My understanding is that ground rent rising with RPI is acceptable. It's clauses that make it double every 10 years which are problematic.

    Has your solicitor suggested going down the statutory lease extension route instead? That way the lease gets extended by 90 years on top of existing and the ground rent falls to nothing.

    There are many threads about lease extension so have a search on here, but also google statutory lease extensions. Info I've given is not gospel - I haven't done it myself - but this is my understanding from reading the regular posts. Someone knowledgable will confirm in a moment I'm sure.

    Is your solicitor experienced in these matters??

    By the way I should add, you don't really have to do this. If the lease is below 80 then it can raise eyebrows, as the extension gets more expensive when that becomes the case .... It should still be mortgageable though and your buyer can consider it when negotiating. How long is the lease actually?
    Last edited by Hoploz; 13-03-2017 at 9:14 PM.
    • anselld
    • By anselld 13th Mar 17, 9:31 PM
    • 5,090 Posts
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    anselld
    • #3
    • 13th Mar 17, 9:31 PM
    • #3
    • 13th Mar 17, 9:31 PM
    There is no such thing as an unfair offer. It is a negotiation.
    If negotiation fails serve s42 and go to first Tribunal.
    • tomryan89
    • By tomryan89 13th Mar 17, 10:13 PM
    • 21 Posts
    • 3 Thanks
    tomryan89
    • #4
    • 13th Mar 17, 10:13 PM
    • #4
    • 13th Mar 17, 10:13 PM
    Thanks for your thoughts.

    There is 82.5 left on the lease. The problem with the statutory route is that it takes too long (as far as I can tell).

    Yeah our solicitor is basically a specialist in lease extension. We instructed him over the weekend based on some very good feedback from a few sources.

    He is out of the office tomorrow and I will be speaking with him on Wednesday. What would you ask him if you were in my position?
    • economic
    • By economic 13th Mar 17, 10:20 PM
    • 1,147 Posts
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    economic
    • #5
    • 13th Mar 17, 10:20 PM
    • #5
    • 13th Mar 17, 10:20 PM
    You can just market the flat as is and sell it cheaper and have the buyer pay to extend it. You will need to serve notice to extend lease as you had it for two years so that buyer can continue the process.
    • tomryan89
    • By tomryan89 13th Mar 17, 10:31 PM
    • 21 Posts
    • 3 Thanks
    tomryan89
    • #6
    • 13th Mar 17, 10:31 PM
    • #6
    • 13th Mar 17, 10:31 PM
    Do you think this is likely to put people off buying the flat?
    • AnotherJoe
    • By AnotherJoe 13th Mar 17, 11:24 PM
    • 5,955 Posts
    • 6,231 Thanks
    AnotherJoe
    • #7
    • 13th Mar 17, 11:24 PM
    • #7
    • 13th Mar 17, 11:24 PM
    Do you think this is likely to put people off buying the flat?
    Originally posted by tomryan89
    It will certainly put some people off.
    It may encourage some others to put in low ball offers. So don't discount the price too much yourself on account of the lease or you'll get a double whammy.
    • cashbackproblems
    • By cashbackproblems 13th Mar 17, 11:33 PM
    • 1,564 Posts
    • 589 Thanks
    cashbackproblems
    • #8
    • 13th Mar 17, 11:33 PM
    • #8
    • 13th Mar 17, 11:33 PM
    It makes the property very unattractive and you would need to reduce the price by the cost of the lease then some more, especially if they insist on this higher ground rent

    In reality you ahould have started this much sooner not when u have had an offer accepted
    • zagubov
    • By zagubov 13th Mar 17, 11:34 PM
    • 14,146 Posts
    • 122,440 Thanks
    zagubov
    • #9
    • 13th Mar 17, 11:34 PM
    • #9
    • 13th Mar 17, 11:34 PM
    As economic and anselid say you might want to start statutory lease extension. You can then offer to pass it on to any future buyers.

    The main forum has a page about it
    http://www.moneysavingexpert.com/mortgages/extend-your-lease
    There is no honour to be had in not knowing a thing that can be known - Danny Baker
    • tomryan89
    • By tomryan89 14th Mar 17, 6:17 AM
    • 21 Posts
    • 3 Thanks
    tomryan89
    Thanks everyone for your thoughts. I'll keep updating this thread as we move forward so that anyone else in a similar situation in the future can reference something.

    In a perfect world yes, one year ago I would have served notice for a lease extension and be in a good decision now. Unfortunately my world looks like this :

    1. See house
    2. Love house
    4. Offer on house
    5. Put flat on market
    6. Enquire about lease extension
    7. Instruct experienced Solicitor
    8. Oh !!!!

    So from where I'm standing, and based on the advice in this thread, my best option is to have my solicitor negotiate informally with the management company which would hopefully reduce the ground rent to make it more attractive to buyers but probably result in me having to pay over the odds on the lump sum.

    Sound right?
    • Hoploz
    • By Hoploz 14th Mar 17, 7:41 AM
    • 3,495 Posts
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    Hoploz
    I would just market the flat at a standard price, then when it comes down to negotiations be prepared for someone to knock a little off if it's brought up.

    You are over-worrying I believe. 82.5 years is not a problem. The lease will become the next owner ... Or indeed the owner after that's problem.
    • eddddy
    • By eddddy 14th Mar 17, 8:05 AM
    • 4,360 Posts
    • 4,022 Thanks
    eddddy
    So from where I'm standing, and based on the advice in this thread, my best option is to have my solicitor negotiate informally with the management company which would hopefully reduce the ground rent to make it more attractive to buyers but probably result in me having to pay over the odds on the lump sum.

    Sound right?
    Originally posted by tomryan89
    A solicitor doesn't normally negotiate things (but I guess your solicitor could be different).

    It's more like buying a flat - you negotiate the price (and terms) with the seller, and then tell the solicitor what you have agreed.

    If you want to give the negotiations more 'gravitas', you could get a valuation and report from a RICS lease extension valuer. The valuer would tell you what you would probably pay going down the statutory route.

    You could then say to the freeholder...

    "If I went down the statutory route, I would probably have to pay you £x. I'm prepared to pay you £x + £2k for a quick deal. (On the same terms as a statutory extension)"
    • tomryan89
    • By tomryan89 15th Mar 17, 6:44 AM
    • 21 Posts
    • 3 Thanks
    tomryan89
    Hi everyone thanks so much for the advice, again.

    So I've had my solicitor sort out a surveyor​ for us to value everything up. My plan is, once armed with the information from the surveyor, to negotiate from an informed position with the freeholder / management company.

    My key aim will be to get a reasonable agreement on the ground rent and I'm prepared to pay a slightly higher premium to get there.

    Will update as we move forward!
    • starshapedbrick
    • By starshapedbrick 15th Mar 17, 2:44 PM
    • 21 Posts
    • 17 Thanks
    starshapedbrick
    Hi everyone thanks so much for the advice, again.

    So I've had my solicitor sort out a surveyor​ for us to value everything up. My plan is, once armed with the information from the surveyor, to negotiate from an informed position with the freeholder / management company.

    My key aim will be to get a reasonable agreement on the ground rent and I'm prepared to pay a slightly higher premium to get there.

    Will update as we move forward!
    Originally posted by tomryan89
    We employed our own surveyor - and paid them to do the negotiating for us - result was a 40% reduction in the price we paid for the sake of a couple of hundred quid. Worth considering if they are going to be doing the valuing anyway and I felt it was better to put a professional in charge of negotiations for this given the difficulties I always had with my management company. Good luck!
    • stator
    • By stator 15th Mar 17, 3:20 PM
    • 5,475 Posts
    • 3,472 Thanks
    stator
    I would just market the flat at a standard price, then when it comes down to negotiations be prepared for someone to knock a little off if it's brought up.

    You are over-worrying I believe. 82.5 years is not a problem. The lease will become the next owner ... Or indeed the owner after that's problem.
    Originally posted by Hoploz
    With only 82.5 year it's already a problem. Going to put off a lot of buyers, especially if the market is first time buyers and young couples (as most flats are aimed at). Might not put off cash buyers, but there aren't many of them in the market. Even most landlords have mortgages.

    Definitely get it extended. Either negotiate what they are asking or start the statutory process straight away. Or both, (if that's possible, talk to your solicitor). Definitely DO NOT tell the freeholder that you are desperate to sell, don't mention anything about selling at all. Give them no information except that you can to extend

    If you're desperate to move you could consider renting it out whilst the lease extension is ongoing. But I don't know if that's financially viable for you.
    Changing the world, one sarcastic comment at a time.
    • da_rule
    • By da_rule 15th Mar 17, 4:23 PM
    • 2,318 Posts
    • 2,085 Thanks
    da_rule
    If you go down the formal route and serve a s.42 notice you can pass the right to extend on to the new owner (should you sell before the new lease is completed). This means that the new owner will not have to wait the statutory 2 years before they can commence proceedings. It does however mean that they will have to either stand by the value you suggest (or agree to) as the premium. However, as you are instructing a proper valuer (rather than just plucking a figure out of thin air) then the value you suggest will (hopefully) be a fair valuation.
    • tomryan89
    • By tomryan89 16th Mar 17, 7:59 AM
    • 21 Posts
    • 3 Thanks
    tomryan89
    Good ideas once again team. Looks like I've got a great Solicitor who is booking us a valuation - looks like the service I've singed up for includes negotiation but I need to calcify whether this is just for the statutory process. If not, hoping my surveyor will negotiate us a good deal.

    I haven't told the management company that we are looking to sell. They asked and I said no!

    If I need to negotiate myself, I'm going to do it armed with the report from the valuation and plan to engage like this:

    "Look, you want a high premium with an increasing ground rent. I want a low premium with a ground rent that would be acceptable to my mortgage provider when it comes to re-mortgage . We both want to avoid the statutory process. Let's figure out what a fair premium and ground rent agreement would be using the objective standards from the valuation.'
    • NRY
    • By NRY 16th Mar 17, 8:07 AM
    • 2 Posts
    • 6 Thanks
    NRY
    Good luck, and keep us posted!
    • always_sunny
    • By always_sunny 16th Mar 17, 8:16 AM
    • 2,649 Posts
    • 2,815 Thanks
    always_sunny
    but why don't you extend using the formal route?
    It may take longer (12 months) but that doesn't' prevent you from selling while it is happening.

    Without knowing the specifics (location, size, etc) the offer may not be bad, GR (£350) might put off people more than the cost of formal route extension and 82.5 years left it's that ugly amount that if someone buys it, they will need to wait 2 years and pretty much forced into higher cost cause of marriage value.

    Anything that has GR more than 0 is too much.
    Expat here with an EU passport.
    • tomryan89
    • By tomryan89 16th Mar 17, 8:59 AM
    • 21 Posts
    • 3 Thanks
    tomryan89
    Going the formal route so that when someone buys it they don't need to wait two years is certainly an option and I am definitely not ruling it out but I would need to discuss with the buyer.

    The only thing stopping me from doing this right now is that it's a one bedroom flat which means a buyer will probably be a first time buyer. Any thing that makes them nervous, like an ongoing lease extension process, is bound to make them more nervous than other experienced buyers. Hence why I'm trying to avoid it.
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