Extend Your Lease guide discussion

Jonny_5

also.. does anyone know if i can look online somewhere at any recent leasehold renewal costs to other nearby residents as they are all under the same freeholder.

want2bmortgage3

I am looking to extend my lease in the next few months, it is now 66 years, originally 99. The ground rent is now £60 a year. With the current lease I estimate a value of £125-130k, with a full lease it should be £150k.
18 months ago I requested a quote from the freeholder to renew, they offered to put it back to 99 years at a cost of £13.5k plus admin cost £900 and an increase in ground rent to £250 doubling every 20 years. All this could be completed within 4 months.
Ideally I would like to get this process done quickly but not get ripped off because of that.
I know through the statutory route I can add 90 years and have no ground rent, which would be more appealling to buyers when I sell.
So my question now is, is it worth trying to negotiate with the freeholder, possibly for a longer term, or lower premium? Will they entertain this?
The wording on the quote suggests they would like me to accept their terms and say that if I initiate a statutory process, then they will charge significantly more for their admin fee!
Thank you for any replies.

Jonny_5

Hi want2bmortgage3

Your freeholder sounds just as mine does. worded to intimidate you into accepting their offer. When i spoke to a solicitor he said it can take 6-8 months going the statutory route, but that 99% of cases never go to an LVT. In my case getting a 90 yr extension and peppercorn ground rate will make the property much more sellable. I now have a choice of selling now and taking a loss or renewing the lease. Im having a hard time deciding.

tim123456789

Marriage Value is the key here.

We have two properties (want2bmortgage3 and Jonny_5) both in the same price range here where one has calculated a MV of 25K and the other 15K.

Obviously, paying 15K for a MV of 25K is a much better deal than paying 20K for a MV of 15K. But which is it? Well you'll need a professional valuerer for that answer.

But that aside how do you negotiate?

There are three parts here, the premimum, the term and the (new/old) GR.

If the GR remains the same the premimum covers the MV and the freehold reversion. and that's what the XXK pounds is for. In W2BM3's case this looks fair value so I doubt that the FH will come down.

So what is the effect of the term and GR on this figure?

If you take this offered new lease it would be possible to immediately put in a statutory request for a 90 year extension at a peppercorn rent.

At this point the MV and Reversion value is 1-2K so the effect of asking for a 150 year term instead of 99 should be an increase in the premimum of that order. Though you should expect the FH to offer a discount for the certainty of getting the money today, instead of in 20-30 years time.

As for the GR - 250 pounds doubling every 20 years is worth about 6K, so if you want to replace that with a peppercorn then expect an increase in the premimum of that order. However, FHs don't like peppercorn rents, so may be reluctant to negotiate on this point. But doubling every 20 years is going to put prospective purchasors off, so asking for every 25 years will be more acceptable to all parties and you should expect that to make a nominal, perhaps 500 pounds, difference to the premimum.

tim

want2bmortgage3

Great replies, thank you both Jonny and Tim. Jonny I have thought about what you are questioning and I think you will make your property much much more sellable if you sort the lease out. There will be so many more buyers, less queries about the lease and a much higher sale price if you extend it now. I am hoping to agree a deal with the FH and here I must thank Tim for his advice as I am now in a position to do this.

I am sending a letter off today for an updated quote, once received I have been told I can phone the freeholder and talk about the terms and hopefully come to an agreement. Tim, thanks for telling me about the FH preferring to keep the ground rent intact. One way I can negotiate is like you said, agree to double the rent ever 25/33 years instead of 20.

Also for your information my freeholder said that whereas the statutory process could take months, an informal agreement may only take 6 weeks, the key here is agreeing terms fair for both sides.

liam1989

partialycloudy wrote: »

We have just completed on the purchase of our lease.

We had 59 years and we were paying £50 ground rent which was due to increase this May to £250.

We purchased the lease for £19,254 (inc all fees, legal etc) it was only about £1000 more exspensive then extending it in the end.

We were advised that our flat was unsellable unless the lease was sorted out and hopefully we can now put it on the market for around £165k (we bought in 2007 for £155K)
I personally would never touch another lease hold property again, it has been a very expensive lesson to learn!

Hi partialycloudy
Congratulations on sorting out the leasehold. Bet it’s a huge weight off your shoulders.
I hope you don’t mind me asking, however I will soon be looking to start the process of extending my lease on my flat. Are you able to let me know how much you paid for all the fees involved. At the moment I have no idea how much this will cost and I just want a ball park figure to aim for.
I too will never touch another leasehold property again either!!!
thanks

partialycloudy

liam1989 wrote: »

Hi partialycloudy
Congratulations on sorting out the leasehold. Bet it’s a huge weight off your shoulders.
I hope you don’t mind me asking, however I will soon be looking to start the process of extending my lease on my flat. Are you able to let me know how much you paid for all the fees involved. At the moment I have no idea how much this will cost and I just want a ball park figure to aim for.
I too will never touch another leasehold property again either!!!
thanks

Hi,

No I dont mind at all.

We had to pay the following in fees:

Sellers legal fees £750
Our legal fees £500
Bank TT fees £30
Vat @ 20%
Land Reg search £7
Land registry Reg fees £140

The actual purchase of the lease for both flats was £36,975 (split between the two flats involved) but the cost of extending the lease was only about £1000 cheaper but ground rent would be £250 per annum.

Hope this helps.

Leases of this nature should be outlawed! They are an absolute con! But yes I am glad it is all done with and we can move on with our lifes now!

liam1989

partialycloudy wrote: »

Hi,

No I dont mind at all.

We had to pay the following in fees:

Sellers legal fees £750
Our legal fees £500
Bank TT fees £30
Vat @ 20%
Land Reg search £7
Land registry Reg fees £140

The actual purchase of the lease for both flats was £36,975 (split between the two flats involved) but the cost of extending the lease was only about £1000 cheaper but ground rent would be £250 per annum.

Hope this helps.

Leases of this nature should be outlawed! They are an absolute con! But yes I am glad it is all done with and we can move on with our lifes now!

Thanks for getting back to me so quickly,
That’s not as bad as I first thought (I think the bit that scared me was when I was told you have to pay their fees too). Hopefully it will cost me something similar (touch wood).
Im starting the process in November and I want it sorted asap.
yes you are right. its all a con - it only exists to make the rich and the lucky richer!!
Thanks again.

richardw

If you start the process in Nov, when are you hoping to have finished?

liam1989

richardw wrote: »

If you start the process in Nov, when are you hoping to have finished?

well ive been told the process normally takes between 3-12 months. im hoping for 3 months.