Lease extension

want2bmortgage3

Does anyone know roughly what percentage of lease extensions are:

1. done directly with freeholder or their agent

2. negotiated via the statutory process?

How can you know whether your freeholder is providing a fair quote?

Do they generally act fair, or in their own interests?

I want to extend my lease, as quickly and smoothly as possible, but I don't want to get ripped off!

Fire_Fox

Use a lease extension calculator or pay a surveyor to value the lease extension. Some freeholders are reasonable will charge a premium for quick conclusion. http://www.lease-advice.org/publications/

want2bmortgage3

I would like a quick conclusion but at a fair price. My freeholder has written with their quote which is a bit more money than I can afford right now, I'd have to save a few more months. Also their term is only adding 33, instead of 90 extra years. Finally they are increasing ground rent. Can I negotiate on those terms and still go through the freeholder instead of the long winded statutory way?

Fire_Fox

You know your freeholder better than we do! Doesn't sound like they are being particularly reasonable, and you are having to save for a few months so you cannot conclude quickly anyway. So why not use the statutory process, get a peppercorn ground rent and 90 more years? How does the price you have been offered stack up against the estimate from the LEASE calculator?

You've claimed twice now it's long winded, but statutory extension can be done and dusted in a few months, the first notice you serve on the freeholder must be responded to within a month I think. And I don't understand the "going through the freeholder" comments - all lease extensions (whether semi formal or statutory) are negotiated with the freeholder or their direct representative since the long lease is a contract between leaseholder and freeholder.

Having an increased ground rent can be offputting to buyers and make it more expensive to extend again in the future. If you are aiming to extend the lease in order with a view to selling you'd be much better serving the formal notice, this 'stops the clock' and fixes at todays prices. You don't actually have to shell out for extending yourself you can assign the agreement to the buyer who can extend at the same time as buying, their lender will value as if the lease were extended.

want2bmortgage3

I have had a conversation with my dad who doesn't understand the leasehold concept as he has only ever owned freehold. He said why don't I leave the lease to expire as I'll be dead then anyway and I have no dependents. He said just rent the place out indefinitely and live on the income (after tax). I think there is something wrong with this idea but I couldn't explain it, how can I clearly explain to him the best thing is to extend the lease?

richardw

Sounds a bit like they are ripping you off.

want2bmortgage3

Well I think their initial quote might be leaning towards a rip off but I hope I can negotiate it somewhat, in terms of the premium and the frequency of the ground rent increases.

With regards to my last question and my dads idea, I know he is right in that I will still be able to rent the place out for a taxable income, and the mortgage will be paid off well within the remaining lease term. I also know the property value will decrease rapidly. I can't quite get my head around weighing these two things up and how to explain to him that leaving the lease is actually a bad idea?

starsky27

The problem I can see with what your Dad is suggesting is if your circumstances change in the future and you need to sell the property. Without extending the lease the property value would decrease quite rapidly and wiuld become difficult to sell. I would extend ASAP.
I'm going though the process of extending my lease informally and the process has been quite easy. I managed to negotiate quite a reasonable amount of the initial lease valuation. As someone has already pointed out use a lease calculator to get a rough idea of the costs. If the freeholder is not going to give you 90 years with a peppercorn rent during the informal route I would then definitely go down the formal route and serve notice. They can try to set whatever terms they like before this.

want2bmortgage3

Thanks Starsky, out of interest if you dont mind me asking, by how much did you manage to negotiate? Was it just the premium, or the term and/or ground rent that you managed to change?

I already know from a quote nearly 2 years ago that they are likely to propose only a 33 year extension instead of 90, and that they also will want to increase the ground rent.

starsky27

Hi,
Just the premium as they already offered the 90 years peppercorn rent. An estimation was set between two figures by the surveyor and the freeholder was trying to charge me the top estimate. We ended up agreeing on a figure in the middle. I used a lease calculator to give me an idea of what I should be paying.
I think I was lucky as my freeholder was very reasonable but I must admit your one sounds not so.One tip I got in here is that if you plan to sell the property ( as I am) then don't tell the freeholder that as it puts you in a weaker bargaining position.
I'm no expert like others on here and can only give you my personal experience. The post by Fire Fox makes a lot of sense to me .

Whatever you decide all the best.

Leaseman_2

Does anyone know roughly what percentage of lease extensions are:

1. done directly with freeholder or their agent - Some - usually freeholder favourable

2. negotiated via the statutory process? - Most - generally fairer.

How can you know whether your freeholder is providing a fair quote? - Use a valuer experienced in lease extensions.

Do they generally act fair, or in their own interests? - Generally own interest

I want to extend my lease, as quickly and smoothly as possible, but I don't want to get ripped off! - Go formal - S42 route

These are my best guesses!