Extend Your Lease guide discussion

AliceBanned

I have a shared ownership with 84 years left on the lease. I own 40% and can't afford to increase ownership to 100%.


I have had a look on the housing association's website and it says that lease extension is only possible for 100% owners. Looking at this I am guessing it might be worth me selling up in 2 years and seeing whether I can find another shared ownership flat or a flat in a cheaper area and buy 100%. What would happen if I have to stay on and see the lease getting shorter and have no option to do anything about it? Presume the flat would lose some value but not sure how much or how serious this situation would be? Quite a few flats in the block are buy-to-lets and there is a lot of demand in the area with values having risen by about 30% since I bought it in 2013.

amal

I have 54 yrs left on my flat, and panicking. Last year he freeholder wanted £50k, but my surveyor said I shouldn't pay more than £45k. One year on, and the freeholder now want £65k! I don't know what to do. This seems like a downward trap. I can try to borrow the money now and pay he £64k or wait for decision Over he Mundy case in the court of appeal, due January 2018 to see if that helps rule in favour of a new model which could make the extension cost some 25% cheaper (for me that would be under £50k rather than £64k). But if the case is unsuccessful it could add more to the lease cost...

An advice would be appreciated

da_rule

Every year that you allow the lease to waste means the renewal price will go up.

It isn't really possible to advise on whether you should wait for the outcome of a case. However, I believe it's the hearing that is happening in January, the verdict could be months later. When is the anniversary of your lease? When do you lose another year?

amal

Thanks - the anniversary of lease is November. It then hits 53yrs.

The court of appeal hearing is January 2018. If the judgment goes in favour of leaseholds and allows a new model of calculation which will bring down the cost, then it will be appealed by the freeholder, to the Supreme Court. This whole case could drag out for another 2 years without any guarantee.

I've been told there could be opportunity for some legislation in this area following the consultation recently on banning leasehold for new builds (q.21 of the consultation was open for further recommendations). I don't know what the chances are of any specific legislation to help with these unfair spiralling costs.

da_rule

amal wrote: »

I don't know what the chances are of any specific legislation to help with these unfair spiralling costs.

Personally, I think a freeholder being compelled to extend a lease is pretty unfair. The freeholder granted someone permission to live in their property for a certain amount of time and subsequent leaseholders chose to take assignment of that lease knowing how long was left on it.

If there are going to be statutory obligations to renew then it is only fair that the freeholder be compensated for the loss of the opportunity to grant a new lease when the interest reverts back to them.

amal

Leaseholders like myself did not know we would be in a downward trap to reversion. Leasehold properties with terms greater than 80 yrs are effectively priced the same as a freehold. The delays, admin and legal costs from freeholders Steve to exacerbate the situation for leaseholders. I don't disagree that the freeholder should be compensated for loss of rent but I see no logic the "marriage value", particularly where the calculations seem arbitrary with more onus being being placed on the "lift" in value due to the extension rights. The lift in value only exists because the law has disadvantaged leaseholders running low.

always_sunny

amal wrote: »

Leaseholders like myself did not know we would be in a downward trap to reversion.

You never read your lease?
Is it like interest only mortgagees who never knew that eventually they had to repay the capital?

da_rule

I think there is an underlying issue which is a lack of understanding about what a leasehold property actually is. It is only ever a countdown to reversion. I think there are an alarming number of leaseholders that don't seem to realise this.

Same with service charge provisions. Most leases essentially allow the freeholder to write a blank cheque for works to the building.

In terms of the lift, the current system seems fair. The freeholder should be entitled to recover the property in say 50 years. He could then sell it or grant a new lease or develop it, all of which would generate income, or he could live in it himself. His opportunity to do any of these (with the exception of development with a court order and compensation paid to the leaseholder) has been lost for a further 90 years. Therefore the compensation should reflect this loss. Obviously the longer that's left on the lease at the point of renewal the less this loss will be as the opportunity to do any of the above is more remote by virtue of the time remaining.

Nnenne1

Always add the max you can, 99years. Speak to a solicitor. If you add 30 years, before you know how t, you're back to square one.

It's your right to add 99 years, the price difference is not much.

da_rule

Nnenne1 wrote: »

Always add the max you can, 99years. Speak to a solicitor. If you add 30 years, before you know how t, you're back to square one.

It's your right to add 99 years, the price difference is not much.

It's actually 90 years under the Act, not 99.