Lease extension

nickyboi

ok so bare with me as this is my 1st thread and im going to try keep it simple as I really need help

im currently purchasing a property, an offer has been accepted of £172,500 and this is a leasehold. when viewing i was informed by the estate agent this had 83 years left on the lease and £80 annual rent but after paying £1200 for the solicitors fees it came to light there was only 80 years left (the magic number).

so firstly can I do anything about being mislead?

This prompted us to enquire about a lease extension which we was told would take 2 weeks, and finally a month later we got a quote!
Now after doing valuations on an online calculator which I understand is not 100% accurate but near enough it told us £5000 was the estimated price. This was then agreed by the estate agent saying it should be this figure so I agreed to paying 50% of this at £2500.
so the quote comes back and says our annual ground rent is being increased to £250 a year and to extend the 80 year lease to 99 years was a whopping £7500!

so the main question is where do I go from here?

Thanks for any replies much appreciated.

ognum

Are you sure the lease us not being extended by 99 years as this is the norm?

partialycloudy

That is just the quote from the freeholder, you should get your own independant survey done by a professional surrveyour and then go back and negotiate.
Ground Rent will always go up if you extend, but even if you dont extend it could be written in the lease that ground rent rises to meet inflation every 5 or so years. So they will get there £250 out of you either way!
But def get your own survey done, take it off the price you offered (our surveyour cost £500) plus you will have legal fees ontop of that.

cattie

Never, ever take any notice of what an ea tells you regarding a lease. They will have no actual knowledge of it & would certainly have never even set eyes on it.

An ea knows only what a vendor tells them & vendors are often either deliberately vague about the amount of years left on a lease & the costs of ground rent & any service charge, or they are just complete novices where a lease is concerned & don't realise how important having the exact information to hand can be, rather than guesstimates.

One of the reasons a solicitor charges more for the conveyancing of a leasehold property compared to a freehold property, is that they will study the actual lease for you & warn you of any pitfalls or restrictions that they feel you need to be aware of. This is what has happened in your case, with your solicitor now discovering the true length of the remaining lease.

When you were told the lease extension would take 2 yrs, what was really being said to you was that after owning the flat for 2 yrs, you would then have the legal right to a lease extension. However, it seems your freeholder is happy to negotiate the terms of extending the lease straight away, without insisting on the 2 yr ownership requirement.

nickyboi

ognum - No it was definitely extended to 99 years rather than adding 99 years. This is what makes me think they have been approached formally rather than statutory by the current owner which means there is room for negotiation.

Partialycloudy - Yes it does say on the quote that this will be reviewed every 5 years due to inflation cost but from what I understand paying a high premium like they have quoted should lower the ground rent to 'peanuts' or is £250 what they class this as?

cattie- Dont you think this is a bad code of practice for an ea to give me false infomation? Leases should be clearly marked and made obtainable by anyone viewing a property or you get to my stage and have spent £1200 to find out that the information is wrong! And to regards of the solicitor, it was me who informed them once I received the preliminary report regarding the lease length and I asked him to confirm.

So going back to what partialycloudy was saying regarding a surveyor if I was to get this done how long does the whole negotiating and survey tend to take?
Plus all the fees, so if I paid my solicitors fee which is around £450 and we got the premium for £5000, £2500 of which I paid. Would it be down to the the vendors to to pay for the surveyor and all the extra costs the freeholder has charged?

Thanks guys for the replies very much appreciated!!

AndyGuil

If the current owner has owned the property for at least 2 years they have the right add 99 years to the current lease and they can get peppercorn ground rent. Ensure this is done as the freeholder is trying it on.

I would negotiate 99 years extra and peppercorn ground rent at the price you saw online. If they don't budge then use the right of the current owner to force this, you will have to then pay for solicitor fees for yourself and the freeholder which will be £1500 total. The current owner can start the process and pass it on to you. As it is 80 years there shouldn't be any need for a valuation as the freeholder shouldn't gain from any value change until it is below 80 years.

partialycloudy

I just looked through my diary and we had the surveyour come round on the 11/10/12 and we had a report by the 26/10/12 and it cost £480.

What area are you in?

Our freeholder wanted to increase our groundrent from £50per annum to £250 per annum and the surveyour thought this was Ok at the time. The whole peppercorn thing confuses me too....when we looked at extending they still wanted us to pay £250 PA but as we bought the freehold we now pay nothing.
So the lease states it will increase every 5 years, when was the last increase? if you increase it with the extension will the time be reset to start again or could you be looking at another increase in a year or two? (if that makes sens :-/ )

AndyGuil

partialycloudy wrote: »

I just looked through my diary and we had the surveyour come round on the 11/10/12 and we had a report by the 26/10/12 and it cost £480.

What area are you in?

Our freeholder wanted to increase our groundrent from £50per annum to £250 per annum and the surveyour thought this was Ok at the time. The whole peppercorn thing confuses me too....when we looked at extending they still wanted us to pay £250 PA but as we bought the freehold we now pay nothing.
So the lease states it will increase every 5 years, when was the last increase? if you increase it with the extension will the time be reset to start again or could you be looking at another increase in a year or two? (if that makes sens :-/ )

A person that has owned the property for 2 years may under the Leasehold Reform, Housing and Urban Development Act 1993 have a peppercorn ground rent. Peppercorn ground rent means £0. If the freeholder won't negotiate to this with a 99 year extension (on top of the current years) then go down the statutory route.

cattie

AndyGuil wrote: »

A person that has owned the property for 2 years may under the Leasehold Reform, Housing and Urban Development Act 1993 have a peppercorn ground rent. Peppercorn ground rent means £0. If the freeholder won't negotiate to this with a 99 year extension (on top of the current years) then go down the statutory route.

Is this correct, only I always understood peppercorn ground rent to be £10 pa. I'm not doubting you, by the way, just trying to ensure that I am up to speed as much as I can be regarding owning residential leasehold property.

cattie

AndyGuil wrote: »

A person that has owned the property for 2 years may under the Leasehold Reform, Housing and Urban Development Act 1993 have a peppercorn ground rent. Peppercorn ground rent means £0. If the freeholder won't negotiate to this with a 99 year extension (on top of the current years) then go down the statutory route.

Is this correct, only I always understood peppercorn ground rent to be £10 pa? I'm not saying you are wrong by the way, just trying to ensure that I am up to speed as much as I can be regarding owning residential leasehold property.

AndyGuil

cattie wrote: »

Is this correct, only I always understood peppercorn ground rent to be £10 pa? I'm not saying you are wrong by the way, just trying to ensure that I am up to speed as much as I can be regarding owning residential leasehold property.

Peppercorn is a legal reference to a very small amount. £10 probably comes in at peppercorn. http://www.lease-advice.org/information/faqs/faq.asp?item=96