How do I go about extending the lease?

Icey77

Afternoon All,

I own a one bedroom flat which is currently rented out, (before anyone starts, it is all above board - I have permission from the mortgage company, I delcare the income and I have a good working relationship with my tenant!!).

I bought the property 3 yrs ago when it had 80 ish years left on the lease and I'm wondering when (if at all) I should consider trying to extend the lease. I'm not expecting to sell the property any time soon, we intend to keep paying the mortgage and end up with a fully paid off property.

I understand that mortgage companies are reluctant to offer mortgages on flats which have low leases left and if I needed to sell it one day it would sell better with a long lease than a short lease.

My question is, how do I go about extending the lease, is it better to do it sooner or later and how likely is it that my free holder will want to extend the lease?

Any help, guidance or advice would be gratefully received.

neb_3

depends on your freeholder, is it an individual, a company, a charity etc etc - some freeholders charge perfectly reasonable amounts while others are simply greedy. i wouldnt bother extending the lease yet, as if you sell within a few years it shouldnt be an issue. it wouldnt hurt to make enquiries of the landlord and see what they would be likely to charge though.

Richard_Webster

You have a legal right to an extension as you have owned the property for more than 2 years. A statutory extension would add 90 yaers to the length of the lease term and reduce the ground rent (not service charge) to nil.

It can be quite expensive to go through all the legal process if the landlord/freeholder won't agree to an extension so it is best to try to agree something with the landlord without doing this if possible. Any sensible landlord will have half an eye on what you would probably have to pay if you did go through the legal process.

The longer you leave seeking a lease extension the more expensive it will be relative to the vlaue of the property. As property prices are lower now than a year or two ago and as the present value is one of the factors taken into account it may be worth investigating sooner rather than later when the lease will be a little shorter and values generally may have gone up.

A yaer or two ago, buyers would have accepted an unextended 77 yaer lease because they had little choice. Now there are loads of flats on the market and not selling the ones with leases under 82 yaers will be more difficult to sell.

Icey77

Richard_Webster wrote: »

You have a legal right to an extension as you have owned the property for more than 2 years. A statutory extension would add 90 yaers to the length of the lease term and reduce the ground rent (not service charge) to nil.

It can be quite expensive to go through all the legal process if the landlord/freeholder won't agree to an extension so it is best to try to agree something with the landlord without doing this if possible. Any sensible landlord will have half an eye on what you would probably have to pay if you did go through the legal process.

The longer you leave seeking a lease extension the more expensive it will be relative to the vlaue of the property. As property prices are lower now than a year or two ago and as the present value is one of the factors taken into account it may be worth investigating sooner rather than later when you the lease will be a little shorter and values generally may have gone up.

A yaer or two ago, buyers would have accepted an unextended 77 yaer lease because they had little choice. Now there are loads of flats on the market and not selling the ones with leases under 82 yaers will be more difficult to sell.

Right then, I had better sit down and write to the freeholder!
Thankyou V much

Icey77

Quick update:

Called up the management company and the news is fairly good. The freeholder is happy to extend the lease outside of the legislation (I assume this is good?!!?)

This will cost me a £75 + vat Admin fee, the valuation fee, the freeholders costs (?) and then the lease premium.

It seems I am the first leaseholder to ask about extending the lease. I have 76 years left - less than the thought 80ish. I understand that the longer I leave it to extend the costlier it gets to extend but can anyone give me some more advice on this and how it works?

Thanks V much!

Richard_Webster

Have a look at http://www.lease-advice.org/calcframe.htm where there is a calculator to give you an idea of the amount you should expetc to pay as a premium to extend your lease. The main lease-advice site also gives a lot of helpful informaiton about the process. Usually if you can agree something, you don't have to go all through the formal valuations etc.

Icey77

Eeeeek!!! According to the link it will cost £12-14,000 :eek:

Whilst I realised it would "cost" me, I didn't think it would cost me this much!!!

Hmmmm, needs thinking on.

Icey77

Just had another couple of thoughts - I'm simply full of them today :rolleyes:

1)Would these costs be an allowance expense for capital Gains Tax? Obviously won't be allowable for income tax.

2) Does the lease extension create a new 99 yr lease from the date of extension or does it add on 99 yrs to the 76 I've got left now?

Thanks

Doozergirl

Icey77 wrote: »

Just had another couple of thoughts - I'm simply full of them today :rolleyes:

1)Would these costs be an allowance expense for capital Gains Tax? Obviously won't be allowable for income tax.

2) Does the lease extension create a new 99 yr lease from the date of extension or does it add on 99 yrs to the 76 I've got left now?

Thanks

1) Yes

2) It would add on a number of years. It doesn't have to be 90 years, that's the minimum you'd be able to get if your freeholder was awkward and you had to force them. You can try to negotiate for more or less - it's a bartering game on something that isn't fixed so you could try asking for a smaller premium in return for a higher ground rent etc. or even a shorter extension.

Icey77

Thought I'd update you lovely people that helped me earlier in the year ...

The management company acting for the freeholder is trying it on :mad:

They had me pay an admin fee of £87 + vat and the freeholders valuation of £230 + vat. Now they have come back with a lease premium of £4450 for a new 125 year lease. This is being done outside of the legislation which I understand to be a good thing.

I was advised to get an independent valuation by my solicitor and straight away he pointed out several terms that the management company were trying their luck with:

• They seek to recover management fees in respect of a percentage of the premium. Such costs cannot be recovered under the legislation.
• They wish to modernise the lease in the landlord's favour. Under the legislation the main body of the lease and its obligations will remain intact and can be only altered with both parties consent.
• They wish to increase the ground rent to £150 per annum, with subsequent increases. Under the legislation the rent reverts to zero.

I'm rather hoping that this surveyor chappie comes back saying the £4450 is ridiculous and suggests a better amount.

This is proving to be a moneypit but I have to do it, the longer I let the current lease expire the more expensive it will get to renew it. And I would have difficulty selling with the current lease of only 76 years. Stuck between a rock and a hard place really and only cold ahrd cash is going to get me out :rolleyes:

All I can suggest to others contemplating a lease renewal is be prepared for spending money like it's water and for freeholders and management companies trying it on because you don't know anything about the whole issue. Pah.

Anyway, lovely weather here and it's almost the weekend

cattie

Is this a new lease of 125yrs (which is what it sounds like) or an extension of the existing lease to 125yrs?

If it's a new lease & the freeholder seeks to make changes to the new lease that are different your existing lease I think he may have the right to do this.

I think if you have an lease extension that the freeholder can raise the ground rent, but I can't be certain of this as my memory is a bit foggy at the moment.

Either wait for Richard Webster to advise you or contact http://www.lease-advice.org/