can i extend my lease by 25 or 50 years?

juanjuan123

Hi there, i have 75 years left on my lease and have informally asked the freeholder for the cost of the extension. They have advised £10k based on the statutory extension of 90 years and peppercorn rent.
I dont need a 90 year extension and dont mind keeping ground rent of say £150. How do i calculate a counter offer based on a 25 or 50 year extension and £150 ground rent?
Any ideas, thanks?

keystone

You ask him outright. Actually does he (or you for that matter) mean extend to 90 years from 75 or add another 90 years to the 75?

Cheers

juanjuan123

The freeholder has quoted based on the statutory extension period of 90 years on top of my 75. I understand I can just ask him but what I don't know how to do is work out how much to offer?
So if 90 year extension and no ground rent is 10k , how much should I propose for 50 years and ground rent of 150?

kev225

£10,000 for 90 years works out at £111.11 per year

So 50 years would be £5,555.55

But you want to pay ground rent of £150 per year?

£150 x 50 years = £7,500

So from those sort of calculations you should offer -£2,000 for a 50 year extension... doesn't really work

Seems on the face of it it's a worthwhile deal to go for the no ground rent option, try talking to them, perhaps offer £5,000 for a 50 year extension?

TrickyDicky101

Due to the time value of money (ie £100 today is worth far more than £100 in 20 years' time) then a 50 yr lease is unlikely to be materially different from the 90 yr lease.

Of more significance is your willingness to continue with ground rent payments (as they will continue to be payable each year from now).

But you really do need to ask the freeholder what the cost would be.

juanjuan123

Thanks for the feedback guys. My concern is that if i just ask the freeholder what they want they will say 90 years only as they get more money now.
I was thinking of the following. Offer them £6K Plus 20 years ground rent at £150 (£3k) and then the remaining 30 years at £250 (£7.5). in the long run they get alot more money (£16.5K) and they have a more valuable asset as there is still ground rent and the renewal will be due in 50 not 90 years.
Am i doing myself a bad deal??in the short term it wont effect me as we have an offer on the flat and just need to get this tied up. The buyer isnt bothered about the ground rent as long as there is an extension.:)

Any thoughts appreciated!

kev225

juanjuan123 wrote: »

Am i doing myself a bad deal??in the short term it wont effect me as we have an offer on the flat and just need to get this tied up. The buyer isnt bothered about the ground rent as long as there is an extension.:)

Sounds like a pretty bad deal to me, you'd be getting the worst of both deals.

I don't know much about lease extensions, I'm just looking at it face value.

Could you not offer £3-4k for 25 years, that'd get your buyers their extension without costing you £6k

martinsurrey

unfortunetly the Leasehold Reform Housing and Urban Development Act 1993 states that any lease extention (which the act applies to) has to be as follows.

1) for an extra 90 years
2) all remaining years + 90 extention at peppercorn grount rent
3) on similar terms to the original lease.

so it looks like to get a statutory extention you will need to go the whole hog.

for confirmation of this you can look at the Leasehold Reform, Housing and Urban Development Act 1993 section 56 (1) and section 57 (1)

juanjuan123

hi Kev, i get the impression that most freeholders wont go for a short term extension as they are in the best bargaining position now (to get marriage value etc).
It may sound like a bad deal for me but as i'll be gone and the ground rent increase probably wont effect the next buyer i thought it would be a good way of getting a few thousand knocked off.