Extend Your Lease guide discussion

Lyncroft

If I'm buying a short lease flat and intending to extend the lease, is the offer price I put in the value with the new extended lease minus the lease extension price. So in effect I'd be paying the short lease price but paying for the lease extension. Bit unsure how this bit works.

lah1308

We are in the process of extending our 95 year lease as we have now had our property for longer than 2 years. Our freeholder has given us 2 options as below....for me the no brainer is the first option...the only difference seems to be we send a letter with some details suggesting a premium after which it all seems the same. However the benefit of going that route is we would get an extra 90 yrs (instead of just going to 125) and our ground rent will stay at peppercorn...what am I missing?

2 Formal
2.1 Leaseholder serves written notice
To start this process you must make a formal written request to extend your lease, before your original lease ends. You may wish to seek legal advice for help in drafting the notice. You must include:
• An indication you are serving a Tenant’s Notice as set out in S42(3) of the Leasehold Reform Act 1993
• Your full name and address
• The date when your existing lease was granted
• The name and address of your appointed representative
• Your proposed premium
• The deadline for Circle Anglia to respond (at least two months)
• If you wish to propose changes to the existing lease, these should also
be included in the notice.
Please also supply a contact telephone number which you are happy for us to release to the surveyor, who will be providing us with a report and valuation.
2.2 Counter-Notice
Circle Anglia must respond to the notice within the deadline provided. A representative of the Sales and Business Support Team will instruct an external valuer to obtain a premium. As the leaseholder you must pay the surveyor’s fee of £400 (plus VAT) in addition to our administration fee of £195 (plus VAT). You will also be entitled to receive a summary of the valuation report. On receipt of the valuation report, a representative of Circle Living will send you a lease extension offer letter stating:
• Premium payable
• Length of extension (an additional 90 years plus the remaining term)
• Ground rent payable (this will be nil or peppercorn)

3 Informal
3.1 No notice served
In this case there is no written Notice served and Circle Anglia will set the terms of the new lease extension.
Should you wish to proceed please write to us providing a contact telephone number. As the leaseholder you will be required to pay the surveyor’s fee of £400 (plus VAT) in addition to our administration fee of £195 (plus VAT). Please enclose your cheques (payable to Circle Living Ltd) in respect of the surveyor’s fee and our administration fee when writing to us.
A representative of the Sales and Business Support Team will then instruct an external valuer to obtain a premium. You will be entitled to receive a summary of the valuation report and you will receive confirmation of the premium in a Lease Extension Offer letter. In all cases the premium will cover:
• An extension for a new 125 year lease
• Ground rent of £100 per annum (this will double every 25 years)

SKPatel

Hello Lyncroft,

I would assume the price you pay would be the market value of the flat with its current lease. Although you should take in account the potential costs of a lease extension to negotiate the sale price. You should also seek advice from a lease extension surveyor who may be able to assist you with working out the figures.

Good luck!

Lyncroft wrote: »

If I'm buying a short lease flat and intending to extend the lease, is the offer price I put in the value with the new extended lease minus the lease extension price. So in effect I'd be paying the short lease price but paying for the lease extension. Bit unsure how this bit works.

SKPatel

Hello lah1380,

Have you spoken with a surveyor about whether there is any value in extending your lease as you currently have 95 years remaining? You still have another 10 years or so before you need to consider extending your lease.

Nevertheless, be a little careful with the informal option. If you disagree with the freeholder's valuation there may be little scope for negotiation and you may not recover the fees you have already paid for the valuation. In fact, if you then decide to proceed with the formal route you will be responsible for the freeholder's costs of obtaining a valuation and therefore potentially duplicating the costs.

It may be worth obtaining your own advice from an experienced surveyor as to the potential costs of the two options to help you decide. The formal route will certainly give you a longer lease with zero ground rent which is useful if this property is an investment.

Good luck!

lah1308 wrote: »

We are in the process of extending our 95 year lease as we have now had our property for longer than 2 years. Our freeholder has given us 2 options as below....for me the no brainer is the first option...the only difference seems to be we send a letter with some details suggesting a premium after which it all seems the same. However the benefit of going that route is we would get an extra 90 yrs (instead of just going to 125) and our ground rent will stay at peppercorn...what am I missing?

2 Formal
2.1 Leaseholder serves written notice
To start this process you must make a formal written request to extend your lease, before your original lease ends. You may wish to seek legal advice for help in drafting the notice. You must include:
• An indication you are serving a Tenant’s Notice as set out in S42(3) of the Leasehold Reform Act 1993
• Your full name and address
• The date when your existing lease was granted
• The name and address of your appointed representative
• Your proposed premium
• The deadline for Circle Anglia to respond (at least two months)
• If you wish to propose changes to the existing lease, these should also
be included in the notice.
Please also supply a contact telephone number which you are happy for us to release to the surveyor, who will be providing us with a report and valuation.
2.2 Counter-Notice
Circle Anglia must respond to the notice within the deadline provided. A representative of the Sales and Business Support Team will instruct an external valuer to obtain a premium. As the leaseholder you must pay the surveyor’s fee of £400 (plus VAT) in addition to our administration fee of £195 (plus VAT). You will also be entitled to receive a summary of the valuation report. On receipt of the valuation report, a representative of Circle Living will send you a lease extension offer letter stating:
• Premium payable
• Length of extension (an additional 90 years plus the remaining term)
• Ground rent payable (this will be nil or peppercorn)

3 Informal
3.1 No notice served
In this case there is no written Notice served and Circle Anglia will set the terms of the new lease extension.
Should you wish to proceed please write to us providing a contact telephone number. As the leaseholder you will be required to pay the surveyor’s fee of £400 (plus VAT) in addition to our administration fee of £195 (plus VAT). Please enclose your cheques (payable to Circle Living Ltd) in respect of the surveyor’s fee and our administration fee when writing to us.
A representative of the Sales and Business Support Team will then instruct an external valuer to obtain a premium. You will be entitled to receive a summary of the valuation report and you will receive confirmation of the premium in a Lease Extension Offer letter. In all cases the premium will cover:
• An extension for a new 125 year lease
• Ground rent of £100 per annum (this will double every 25 years)

lah1308

Thanks for the response, yes I agree, the formal option seems the obvious option as the only extra piece of work is drafting a letter serving notice.

The reason we are thinking of doing it now is because it would cost about £3/£4k + expenses but in 5 or 10 years it could be £6/£7k with expenses so rather now than then? Unless we are planning on selling in the next 5 years I guess...but don't think we will!

Clapham1975

Hi there


Our flat in London has 85 years on the lease, its worth around 480k and ground rent is £40 a year. Ive approached the freeholder about adding 90 years on the lease and he has come back with a cost of 9.5k and ground rent to go up to £250 rising £250 every 25 years, a £75 registration fee and £1000 contribution to their legal costs. They have made the proposal without a valuation, apparently saving me £650 and they say that if I serve a formal notice they will serve a counter notice which would cost me legal fees/conveyancy costs. They are saying that the terms they have offered me would save me money but they would say that wouldn't they! If anyone things what they have offered is fair or has any advice please let me know.
thanks

SKPatel

Hello Claphan 1975,

For your own peace of mind, i would suggest that you speak with an experienced surveyor about the offer. The registration fee and legal fees are slightely high but not completely unreasonable. However, my concern is that the ground rent may put off future buyers.

If you were to serve a formal notice then you would be responsible for the freeholder's legal and valuation fees. However, even with these in mind, it may be beneficial for you to serve a notice if you are getting a better deal.

Good Luck!

Clapham1975 wrote: »

Hi there


Our flat in London has 85 years on the lease, its worth around 480k and ground rent is £40 a year. Ive approached the freeholder about adding 90 years on the lease and he has come back with a cost of 9.5k and ground rent to go up to £250 rising £250 every 25 years, a £75 registration fee and £1000 contribution to their legal costs. They have made the proposal without a valuation, apparently saving me £650 and they say that if I serve a formal notice they will serve a counter notice which would cost me legal fees/conveyancy costs. They are saying that the terms they have offered me would save me money but they would say that wouldn't they! If anyone things what they have offered is fair or has any advice please let me know.
thanks

AndyGuil

As you have more than 80 years on the lease there is no marriage value. As there is no marriage value that means a valuation is not necessary. 9.5k sounds high. Check using the MSE calculator and see what figure you get.

janthemum

I recently bought a 2 bed flat in February.

Cash buy. 110k with 72 year lease.

I have put by money to extend lease and aware I can do so after 2yrs but if freeholder agrees there is a possibility I could do so before, which I would prefer as am aware each year the lease reduces the cost to increase lease goes up.

There are 44 flats in the block and many have extended.

My question is, I plan to write to lease holder and just ask if he would be willing to extend now or before the 2yrs but do I keep it simple and to point or dress it up and explain I plan to live in flat for many years etc etc as I do tend to waffle a bit when writing. When I moved in it was in a bit of a state and I have already started to professionally renovate it back to a high standard, its Grade 2 listed. I just want him to see Im looking after it and its well loved. Or will one line do with the facts.

Thanks.

SKPatel

Hello Janthemum,

If you intend on writing to the freeholder, i would suggest you keep it short and simple. Say that you are seeking to extend the lease on the flat and ask what the terms and costs would be. Depending on the reply you can then obtain some advice and start to negotiate.

Good Luck!

janthemum wrote: »

I recently bought a 2 bed flat in February.

Cash buy. 110k with 72 year lease.


I have put by money to extend lease and aware I can do so after 2yrs but if freeholder agrees there is a possibility I could do so before, which I would prefer as am aware each year the lease reduces the cost to increase lease goes up.

There are 44 flats in the block and many have extended.

My question is, I plan to write to lease holder and just ask if he would be willing to extend now or before the 2yrs but do I keep it simple and to point or dress it up and explain I plan to live in flat for many years etc etc as I do tend to waffle a bit when writing. When I moved in it was in a bit of a state and I have already started to professionally renovate it back to a high standard, its Grade 2 listed. I just want him to see Im looking after it and its well loved. Or will one line do with the facts.

Thanks.