lease extension questions

want2bmortgage3

i have a couple of questions regarding a lease extension.

i have a quote from the freeholder/agent of 15.5k including their fees, this is adding 34 years back to the lease and a new ground rent of 250pa doubling every 20 years.

the mse calculator estimates a price of 11-12000 plus costs, the freeholders legal & valuation costs they say will exceed 2000. so that looks like 13-14000 plus my costs, which i think is a solicitor and a valuation fee?

so that is my first question, are the costs going the statutory route, basically just the solicitor and valuation fees for both sides?

my second question is, is there a way to put a figure on the difference between terms?

ie.. adding 90 years and zero ground rent vs adding 34 years and 250 ground rent doubling every 20?

thanks for any information

geet

hello, i have been asking a similar question in this forum but have not got many replies (lease extn to 99 years or add 99 years - last on 4/12/2013).

from my understanding, the statutory route means adding 90 years with no increase in ground rent. the price indicated by calculators reflect this. however if the freeholder is only taking it to 99 years and increasing ground rent then that is something beneficial to them in the long run (in my understanding) and so you must negotiate the price down from the price on calculators.

i am not sure but i think that if you go the statutory route then you have legal fees + valuation + solicitor fee for agreement. if you accept or negotiate yourself and agree to a figure with freeholder, then you do not need valuation (around £500) and legal fees for the dispute or whatever. of course you still will have to incur solicitor fee for writing the agreement for both parties.

hope this helps. my post was asking if someone could give me an idea as to what kind of negotiation one could do in such a situation.

G.

want2bmortgage3

thanks geet. there are so many fees its ridiculous. why are there fees for both parties? cant we both just employ the solicitor , valuer, etc and let them decide a fair price? why is a valuation £500, estate agents come round and value your property for free.

what i worked out with the ground rent was that if you add it up over the whole new 99 year term it totals £155000. whereas its £0 the statutory way. whole thing is crazy, but if you don't have the lease extended then you are in a much more difficult position to sell.

kmmr

Hi,

First geet, I did see that thread, but assumed it had been answered! sorry.

There are two main ways to extend a lease. The first is to have a chat to your freeholder, agree a price, term, rent and then do the paperwork, which presumably requires a solicitor, but perhaps only one. If that works, then there is no need for a surveyor - it's just two parties agreeing.

The other end of the scale is to use the statutory process. That involves you living there at least two years, and initiating the process via as42 process (I think). Then using surveyors from both parties, agreeing a price (with the aid of the leasehold valuation courts if needed) for a 99 year extension and removing the ground rent. So the only thing to agree is the price, the other terms are fairly set.

Then let the solicitors sort it out.

IANAL but I think the process can be anywhere from one extreme to the other. For example, you might want to use the statutory approach, but agree between you on a price without the surveyor, or agree to use a single surveyor.

You can only use the statutory extension method once. But that shouldn't be a problem for you at least! If you agree a non-statutory extension (which is what it looks like you have been proposed) then you can ask for the 99 year extension using the statutory method later, although I'm not sure if the 2 years minimum ownership clock restarts.

The process doesn't HAVE to be full of surveyors and costs. I extended my lease along with all the flats in my building from 70ish years to 999 for just the cost of the legal fees. But it all depends on whether you can come to a negotiated agreement with the freeholder or if you are forced to use the statutory process.

kmmr

p.s. I am only speaking from experience here. Hopefully the legal bods on this board can give more details.

I just wanted to show that you don't have to follow the exact processes in the statutes etc. In the end it's two parties agreeing something, and it can be done more easily if you agree to it.

The statutory process gives you a good backup if the negotiation fails.

AndyGuil

I personally would go for 99 year extension and peppercorn ground rent.

want2bmortgage3

I am trying to negotiate a price with the freeholder, we are some way apart at the moment. I am worried about the fees and time it takes if I went the statutory route. Freeholders fees alone will be over £2k.

I am pretty sure the increase in value of my flat will more than cover the cost of the lease extension, so is it worth just agreeing a price with them direct and avoiding the time delay and fees?

eddddy

want2bmortgage3 wrote: »

I am trying to negotiate a price with the freeholder, we are some way apart at the moment. I am worried about the fees and time it takes if I went the statutory route. Freeholders fees alone will be over £2k.

I am pretty sure the increase in value of my flat will more than cover the cost of the lease extension, so is it worth just agreeing a price with them direct and avoiding the time delay and fees?

I guess it's down to the mentality of each party - who is more desperate and/or who is best at negotiation etc.

Freeholders are usually aware of the hassle and costs incurred by leaseholders when going down the statutory route. So they often ask for a higher price, in exchange for going down the informal route.

want2bmortgage3

thanks eddy
if i am going to re-mortgage on buy to let soon then i think it might make sense to extend the lease now as it will make the flat worth more, and i will be able to borrow more, the extra borrowing should cover most of the cost of the extension
eg if its worth 140k now i can borrow 105k
if i extend and its worth 160k then i can borrow 120k

geet

My advice to my brother was that he can also haggle to bring down the price with freeholder as the freeholder has a lot to benefit by him not going the statutory road - the adding 90 with increase in rent vs taking it to 99 with increase in rent.

My suggestion would be if you do not want to go the statutory route, to negotiate the price down from the one you get from MSE calculator as that is for the proper statutory terms. My brother got a 25K figure which he negotiated down to 20K. I think then you will have to pay for solicitor fee drawing the agreement and nothing else. Should be around £500. Not sure what costs the freeholder will ask you to cover!

It is a minefield...

geet

geet wrote: »

My advice to my brother was that he can also haggle to bring down the price with freeholder as the freeholder has a lot to benefit by him not going the statutory road - the adding 90 with increase in rent vs taking it to 99 with increase in rent.*

...

* pls read this as

adding 90 with NO increase in rent vs taking it to 99 with increase in rent.

tnx
g