Lease extension - Huge costs

Maylo

Hello,

I was wondering if someone could help me? I've been living in my flat for about 5 years and the leasehold left on it is around 80 years (I pay a ground rent of c.£60/year). When I first moved in, the last owners had a quoted price to extend of £10,000, with a ground rent increase to c£300/year.

I've now saved up some money and have asked about either purchasing a share of the freehold (which they have rejected outright) or to extend my leasehold. The letter has just come through and they have quoted the following:

• £25,650 for an extension which includes some of the years I have left on my existing lease (157 years made up of 90 years + 67 years, which is less than what I have left), but with no ground rent charges, or:
• £19,000 for 125 years from 25th March plus £350/year increasing by the same amount every 25 years, or:
• £17,500 for 99 years plus £350/year increasing by the same amount every 25 years, plus £600 fees.

I'm confused! I just don't understand as to why it is now so much, or why I would lose the current tenure that I have on the leasehold, or why the ground rent would increase by so much?

Please can you help!! I'm not sure what to do now to handle this?

I'm also a little aggrieved as in the time I've lived here the owners have never touched the house, and there are external issues that need fixing that they are in denial about!

MANY thanks

Maylo.

chris_m

I suspect that they've based the prices on the difference in the flat's value with the remaining lease at the time of the quotes and with an extended lease.

Since there is now five years less left on the lease than there was when you bought, that value difference is now greater, hence the increased extension quotes. Leave it another five years and they'll probably be even higher.

G_M

Talk to lease-advice.

Maylo

Blimey! It's a huge increase and my flat hasn't really increased that much at all...does it really sound reasonable?

And MANY thanks for your reply.

Maylo

That site looks great - according to their calculator I should be looking at between £3,000-£5,000! So I think I need a professional to help me. Thank you!

Ulfar

You need to speak to the leasehold valuation service. In my opinion your freeholder is taking the !!!!.

I would not be agreeing to a change in ground rent at all and as far as I am aware if you have the LVT get involved this will not be part of extending a lease.

You do have the right to buy your freehold but it depends on how many flats and getting other owners to join you.

The LVT site has lots of useful advice.

propertyman

Between £300 and £500 a local chartered surveyor can advise you on the options they gave you and help with application to the LVT if you cannot agree terms with the freeholder.

http://www.ricsfirms.com/vw/search/Advanced.aspx search leasehold enfranchisement.

Don't conflate this with a lack of repair, while the standard of teh building will affect its current value, if the freeholder is fialoing to meet the covenants, then as a group they should be asked to, bearing in mind you the lessees will be paying for it.

If they decline to answer, then there are options that you can start a new thread over, from specific performance court appointed manager right to manage and right to enfranchise the freehold.

jee

You need to get an independent surveyor in. Have a look at the lease website for one in your area.
Also check how many years are remaining on your lease- under 80 you pay a premium called "marriage value" which is when it gets expensive. From the quotes above it seems that you may have less than 80 years.

Just as an example I had a flat with 74 years remaining- the flat is worth 200,000. I had to pay a premium of 7,000 to extend to 125 years. The longer you leave it the more it costs. I had two surveyors in and presented the premium to the freeholder.

Richard_Webster

You need to be clear about the length of your lease. Sometimes the term is backdated to be consistent with the others in the same building. So you could have a lease dated in 1993 for 99 years from a date in 1980 - that would mean it only had 67 years rather than 80.

Freeholders are not bound by figures they give in an informal way and when you bought your solicitor should have advised you that the figures could go up.

MonkeyPower

You definitely need professional advice on this one.

If your freeholder is negotiating about the amount of ground rent that is something you need to make sure you properly understand. I extended my lease about 18 months ago and I no longer pay ground rent - because that is one of the benefits the leaseholder normally gets out of extending their lease.

If you did not extend your lease at all, when your lease reached year "0", the property would revert back to the freeholder. What you are doing when you extend your lease is preventing that from happening. You also normally stop paying ground rent, so some (if not all) of what you are paying them is to cover the loss of income from the ground rent. Ground rent is basically just money they can put in their own pocket for the privilege of letting you live there.

The different offers they are making you seem to be based on them wanting to maintain that ground rent income in the long term because that is "free money" as far as they are concerned.

When I extended my lease I got a surveyor out and they gave me a maximum and minimum amount for how much they thought it should cost to extend (you should never overtly share this figure with the freeholder, by the way. This is your information so that you can work out what to offer). The freeholder could have done the same but chose not to do so (even though I think it should have been me who paid for their surveyor, so it would have cost them nothing). Instead she advised using the leasehold advisory service calculator. The figure from that calculator was £7000-9000. The surveyor had said it should cost between £10,500 and £13,500, although the freeholder didn't know this. We finally agreed on a figure of £9000. My ground rent was also removed.

The online lease calculator is useful, but the figure might well be a bit lower than that given by a surveyor. The surveyor is likely to be more accurate because s/he should know the local market. My solicitor thought the agreed price was "cheap" (although £9000 still sounds like quite a lot of money to me!).

Interestingly, I was talking to a property managing agent a while ago and we discussed lease extensions and he said that it was a very common tactic of freeholders to find out the true value of extending the lease and then massively inflating the figure.

Depending on how long you plan to stay in your flat, the £25000 figure might work out the cheapest. With the other options, in a matter of only a few years you will have gone above that figure when you add up the costs of extending the lease and all the ground rent you will have paid. It could be a case of spend now save later by paying £25000 (or whatever you can negotiate it down to).

You should also make sure you know whether they will change any other terms of your lease (but don't put the idea in your freeholder's head!). This is why you should make sure you have a good solicitor who is an expert on dealing with lease extensions.

I recently got advice from the Leasehold Advisory Service about some other lease related matters. They were very helpful (and free!) and I would recommend them.

Ultimately, if you cannot agree a suitable figure to extend your lease, you can go to tribunal and they will determine the amount.

Maylo

Richard_Webster wrote: »

You need to be clear about the length of your lease. Sometimes the term is backdated to be consistent with the others in the same building. So you could have a lease dated in 1993 for 99 years from a date in 1980 - that would mean it only had 67 years rather than 80.

Freeholders are not bound by figures they give in an informal way and when you bought your solicitor should have advised you that the figures could go up.

You are right, so I do have a shorter length, which means the Marriage Value has kicked in. After looking at the calculator it looks like this would be a reasonable sum! So now I need to work out if I should just go with it as appointing a solicitor and/or surveyor may well be just adding even more cost. My head says get advice, my wallet says otherwise, but I think my head will win that battle!

Thank you everyone for taking the time to help.