Cost of Lease Extension.....Is it a fair price?

Terri10_2

Hi

The lease on our flat is currently only 74 years, so we have applied to extend it. The relevant survey has been done (by the Landlords surveyor at our cost) and we have now been offered the lease for £10,000. I don't know whether this is a fair price or not. I understand that becasue the lease is less than 80 years the marriage value is a big factor in the cost, but having used some of the on-line calculators £10,000 seems a little excessive. The lease would also only be extended for 51 years to give a new lease of 125 years and the ground rent will be increasing to £200 pa.

Current vaue of property: £150000
Current ground rent pa: £50

I would be grateful if anyone has any advice. The reason for extending the lease is because we are hoping to sell.

Thanks!

Jowo_2

There is a government information site called the leasehold advisory service that also has a calculator (though i believe the calculations are more complex when the lease is under 80 years). I thought that extensions offered now tend to be an additional 90 years in duration. Check out that website.

Terri10_2

Thanks Jowo. I have looked at the leasehold advisory service, it's all a bit confusing to me though! There is something in the calculation of a lease extension to do with the yield rate, but trying to find out what that particular figure is is a nightmare and worse still we had to pay almost £600 for the surveyors report and we don't even get to see it!

You're right about the additional 90 year extension which apparantly we are legally entitled to but as the LL has only offered to make it up to 125 yrs we would have to serve notice etc and pay all costs associated with it! Just more expense!:(

Anyway thanks again.

Fire_Fox

The LEASE website calculator requires the current value of the flat, current ground rent and commencement date of the lease, it will calculate the yield for you. I think you are looking at the 'Valuation for Lease Extension' advice booklet; for the calculator see the bottom of the page here
http://www.lease-advice.org/

Just because the superior landlord is only offering to extend back to 125 years doesn't mean you cannot informally negotiate to extend by 90 years. It may be the freeholder is not aware of the legal position so it's worth quoting parts of the LEASE website and naming the relevant Act. IMO it is a false economy not to do things by the book here, not only are you entitled to a 90 year extension but also a peppercorn rent. Over time these two things should pay for themselves, potentially in the desirability of your property when you sell. I cannot see any reason why the surveyor's report would be withheld, have you written and asked to see it?

Terri10_2

Thanks Fire Fox, I have read the Valuation for Lease Extension notes, which have been helpful to some degree, but I have found that all the calculations are based around the 90 year extension which as you say would entitle me to a peppercorn rent. With regards to me being privy to the surveyors report, apparantly according to our LL they are "not at liberty to disclose" which seems a little unfair. For the moment I am going to try to negotiate the price and point out the LL will have no loss of income as he is not offering us the 90 year deal and will still be getting his increased ground rent. Wish me luck!