Extend Your Lease guide discussion

want2bmortgage3

I am looking to probably sell my leasehold flat, but the lease is 62 years. I have a quote from the freeholder for 20900 to extend 99 and increase ground rent.
To do this I will have to borrow from credit cards etc. I feel a reluctance to do this, despite the fact it will add value (more than the cost) and mean a wider buying audience if I sell.
Can anyone give me any encouragement to do this and borrow to fund it or is there any reason not to?

GTG

You will have difficulty finding a buyer who has to borrow to purchase your property with a lease that low. Many lenders will not lend on a low lease, I understand that 70 years appears to be the cut off point for most lenders.

Do not just accept a quote from your freeholder, you need an independent valuer. You can get an idea from the calculator on the Leaseholder Advisory Service's website or a believe they may be one on MSE now. Always consult a solicitor before agreeing anything.

You do not need to extend the lease before you sell, you could either negotiate a discount with the prospective purchaser and assign you rights to a lease extension to him/her/them. Assuming they are prepared to buy and do it themselves. Alternatively, you could sell the property on the condition that the property will come with a 99 years lease. Instruct your solicitor to extend the lease at the same time as he is doing the conveyancing to the new purchaser. That way your solicitor will deduct the cost of the lease extension from the proceeds of the sale a long with the legal costs.

If you are not selling now the cost of the lease extension will be increasing exponentially so it is a good idea to extend as soon as possible. Putting the lease extension on credit cards will cost you a fortune in interest.

An an alternative is to ask a close relative or trusted friend to finance the lease extension for you and give them some equity in your property to the value of the lease extension and the value that will be added by extending. Calculate it as a percentage and when you sell the friend/relative receives back the that percentage of the sale proceeds less expenses. I deed would have to be drawn up and all eventualities considered, done properly it would be mutually beneficial.

Okrib

bb69 wrote: »

Hi thanks for your response

My lease goes below 80 years in June

I have agreed a price albeit £1000 more total price to extend that he quoted a year before and then an extra £25 on top of the ground rent. I will however get 90 years on top of my 80 year lease. It will cost me £9000, my fault for waiting I guess, but couldn't have sorted it last year.

I am still waiting to get this in writing from the freeholder (we agreed price just before Christmas)

Thanks for advice about not doing anything outside of the act. I want to be secure and covered and not pay more (for instructing someone to issue section 42, after I have agreed a price)

Also I don't want to p*ss the freeholder off by going formal

What do you think? Or anyone else

Thanks!

What does your ground rent do? Does it double every so often? If so, then that small £25 will add up hugely over time... £100 ground rent doubling every 10 years is £102,400 per year after 100 years. An extra £25 on that initially turns into £128,000 per year after 100 years. For your information, if you go through the formal process then you end up paying no ground rent, as well as having an extended lease.


If I was your freeholder, I would be stalling you until the lease was under 80 years, when marriage value will need to be paid. How do you know that isn't happening? As it's informal discussions, you have no protection whatsoever.


You will save money and be protected by serving a Section 42.

sjb1983

Hi,

I've been offered my current property by the landlord at a good price but am aware that 67 years remaining on the lease is likely to be costly and an issue.

I don't know whether it's worth the risk.

It's in a nice area where we are happy to live but it's not a long-term option as it's one bed (we're in our early/mid thirties)

I'm getting equal amounts of advice either way.

Thanks,
Steve

briddj

Hi there. Currently about to start my lease extension and a solicitors who have done several lease extensions on this development have offered a managed lease extension claim for a fixed fee of £1,995+VAT - this is for surveyors and legal fees but no tribunal work. On top of this figure I have the landlords reasonable recoverable fees and the premium to purchase an extended lease.

Does the figure of £1,995 plus VAT seem fair?

want2bmortgage3

Thanks for your advice GTG

tudorwin

Hi I am very new to this having only joined today. So if this post is in the wrong section. please move it & send me a link to where it is.
I have been selling my flat since mid February this year. My estate agents marketed it for £130,000 with 66 years remaining on the lease. Very quickly the agents found a buyer who offered me £128,000 provided i extended the lease back to its full 99 years.
I emailed my solicitor stating these terms. Since February my solicitor has been dealing with The owners of the building solicitor. At first they said they wanted somewhere between 11,000 & 12,000. My solicitor thought this was a bit steep, & suggested offering £9,000 another week goes by & my offer is rejected, but they said they would except £10,000. Weeks & weeks go by while the draw up the new lease, & even then have to send it to the owner to sign. another 10 days wasted.
Mean while i googled lease extensions. With out exception every one of the searches said under the 1993 lease hold act I am legally entitled to EXTEND my lease by a further 90 years. Meaning 90 + the 66 years remaining should have been 156 years. I only realised last night when my buyer telephoned me to say having read the new lease extension. The owners solicitors are charging me £10,000 plus there charges of £650 + vat to extend the lease to a total of 83 years. Meaning they want to charge me £10,000 + to extend the lease by only 24 years. Which in turn means my buyer is not happy to sign exchange of contracts. Which ultimately means we are now back to the very beginning looking for a new buyer. Can any one offer me some help & advice on this issue.

Okrib

Unfortunately you’ve been extremely badly advised by your estate agent, who I imagine is not particularly experienced in selling flats with shorter leases. It also sounds like your solicitor isn’t particularly on the ball to allow this situation to snowball.

What you had was a conditional offer, and unfortunately it appears you weren’t advised of that fact.

Your second problem is that you have attempted to extend the lease outside of the formal channels. This is a very risky move and not one that would be recommended.

What should have happened when you put the property on the market, is that your agent recommend you get a valuation for the formal lease extension (which would cost a few hundred pounds), and sell the flat to an incoming buyer with you serving a Section 42 notice to extend the lease by a statutory additional 90 years. You could then provide the figure from the valuation report to prospective buyers, who would know the total cost of the flat purchase.

Your numbers also don’t add up. You said it needed to be 99 years but the freeholder wants to give you a lease of 83 years for the money – that also indicates the freeholder is being very sneaky, as the incoming buyer will need to extend the lease in a couple of years otherwise they will have to pay marriage value (which is payable once the lease drops below 80 years, and increases the cost significantly).

As it is, you could still salvage the deal. You would need to agree to serve the Section 42 notice on behalf of the incoming buyer, and adjust your selling price to take into account the estimated cost of the lease extension – which is what should have happened in the first place. This protects all parties and is absolutely the way it should be done.

I would make sure you check the ground rent on the proposed extension, as I suspect it might contain some nasty surprises (which would render the flat pretty much unsellable) but whatever you do, don’t do it! It is extremely likely you are being ripped off.

If you can’t salvage the buyer, then change agent and solicitor.

eddddy

tudorwin wrote: »

Meaning they want to charge me £10,000 + to extend the lease by only 24 years. Which in turn means my buyer is not happy to sign exchange of contracts. Which ultimately means we are now back to the very beginning looking for a new buyer. Can any one offer me some help & advice on this issue.

I think you need to get another solicitor (or a lease extension valuer) who understands lease extensions.

Broadly, there are two types of lease extension:

- Statutory Lease Extension
- Informal Lease Extension

A statutory extension adds 90 years at zero ground rent.

An informal one can be any terms you agree. (And I suspect that your freeholder is proposing very, very, very bad terms - at a price that appears cheap, but isn't.)

You really need to talk to a lease extension specialist for advice. (A good EA might be able to give you some background, but don't rely on their advice.)

wdpch

Just had my lease valuation done, people downstairs have exactly the same lease terms as me but have just had a drop kerb and parking for 2 cars done in front garden. Am I right in thinking that this will increase the value of their lease?