Extend Your Lease guide discussion

strawberries1

Whatever you do, don't go the informal route. Go to the tribunal. http://www.leaseholdknowledge.com/informal-lease-extensions-are-pure-poison

http://lawingov.org.uk/forum/onerous-ground-leases

amal

I can't see how the current system is fair. The freeholders profit is described as "compensation of loss of reversion". It is only a loss if there is a right to recover the lease in the first place. There is NO automatic right to recover the lease. There is only the fortune (and exploitation) of recovering a lease in circumstances where leaseholders are slow to carry out an administrative task which exercises their own rights.

There are 12 families, in a block of 20, facing diminishing value of our homes. Homes we paid a premium price, believing we could re-sell at market value within our life time. We are all trapped as each year the cost of renewal moves even further away from our means.

I would urge all leaseholders to participate in the gov consultation. This is an online survey (it is yes/no for the main part and the link can be found by searching "government consultation unfair practices in leasehold market") and at Q21 ask the Government to overturn Mundy and prescribe relativity according to the Parthenia model. It will only take a couple of mins to complete.

strawberries1

Further information about doubling ground rents, extending the lease term by the informal route compared to statutory route
https://barcode1966.wordpress.com/2015/04/07/the-truth-about-informal-lease-extensions/

Consultation ends 19 September 2017.

https://www.surveymonkey.co.uk/r/leaseholdhouse

email: LeaseholdHousesConsultation@communities.gsi.gov.uk

da_rule

amal wrote: »

There is NO automatic right to recover the lease. There is only the fortune (and exploitation) of recovering a lease in circumstances where leaseholders are slow to carry out an administrative task which exercises their own rights.

There are 12 families, in a block of 20, facing diminishing value of our homes. Homes we paid a premium price, believing we could re-sell at market value within our life time. We are all trapped as each year the cost of renewal moves even further away from our means.

No one has said that there is a right to recover the lease. There is however, once the lease determines, a right for the Freeholder to recover the property that was leased (since the lease has ceased to exist, the lease itself cannot be recovered). Albeit after the service of the relevant notices and potentially obtaining a court order, in the same manner as ending other forms of residential tenancies.

In relation to the second point, surely this is explained during the conveyancing process? I can still hear my lecturer saying in one of the very first conveyancing classes we had that "a lease is a wasting asset" (meaning that over the term of the lease it wastes away to nothing). He also implored us to thoroughly explain the consequences of this to our clients when in practice.

As you have pointed out, there is a route to extend the lease (regardless of anyone's views on the cost of the process). But also as you point out, when the lease is allowed to run down below the marriage fee limit the extension could prove to be prohibitively expensive. This can also mean that the property is difficult to sell and will also have an impact on the value. However, all of this should, in my opinion, form part of the initial advice given to you by a solicitor when you purchase a leasehold flat. There should be an assumption that the lease won't be extended (either because of expense or through inaction) and the advice should be given accordingly.

Ask yourself, if when you purchased the property you had been told that the lease extension process existed and that if the length of the lease drops below 80 years it would become increasingly and prohibitively expensive to renew and have a negative impact on the saleability and value of the property, would you have still purchased? I'm assuming that you weren't clearly and expressly told the above during the conveyancing process?

amal

I was in no way aware of the cost of missing a date to carry out an administrative exercise. I've not heard any logic behind a "marriage value" and why it is used to penalise leaseholders disproportionately for failing to act sooner. Freeholders do not have a right to reversion, it is only a default. This default is exploited unfairly through the increasing costs on leaseholders through tribunal costs and arbitrary marriage valuations designed by agents to the freeholders. If, as you say, the system is fair, the costs of leasehold extensions would be reflected in both the sale of Leaseholds over 80yrs (discounted to reflect the cost of error to Renew) as well as the price of the freehold - It is not.

miller3653

How does the cost calculation change to extend the lease, when the Ground Rent increases by 150% every 10 years?

da_rule

miller3653 wrote: »

How does the cost calculation change to extend the lease, when the Ground Rent increases by 150% every 10 years?

It is included in the premium, essentially as 'lost income' for the freeholder.

miller3653

So how is the calculation made? Also our Freeholder has sold on the rights to the Ground Rent to a third party, so as far as I am aware there is no lost income for the Freeholder.

da_rule

That doesn't matter, he would probably have to buy himself out of the contract with the third party.

In terms of how it is calculated, you simply add all of the yearly ground rents together (including the increases) to get a sum. So if there was 10 years left (ignore the marriage value implications) and the ground rent was £50 doubling each year the rents would be:
£50
£100
£200
£400
£800
£1600
£3200
£6400
£12800
£25600

Therefore the amount to be added the the premium would be the sum of all this (which I make to be around £51,000). So for yours you need to just work out how much ground rent is due over the remainder of the lease based on the ground rent increases.

miller3653

Thank you for your reply, but for us that's pretty scary! Our current ground rent is £500 it rises by 150% every 10 years and we have got 240 years on the lease! The purpose of exploring the lease extension would be to reduce the ground rent required as I understand it would drop to a peppercorn rent. The exponential rise in ground rent takes the final cost into millions!!