My lease extension - does this sound a fair price ?

hedgehogpenguin

Hi, I am after a bit of advice. I own a flat in South East London (SE4) for which I paid 212500 for 15 months ago. I have no idea what it's value is now as no-one nearby is selling or has sold a similar flat recently (it's in a conservation area so lots of differing house styles). The lease when I bought it had 76 years remaining. I spoke to the freeholder a few months ago and he said we could extend it to 99 years for 13000, which to be honest sounds expensive but it is under the 80 year mark so maybe not so. However, the people in the flat below have just bought their flat and negotiated him to 8500 for the extension and he said this morning that we could do the same. Does this sound a fair price ? I have tried the lease extension calculator but it is difficult as I don't know how much this extension will increase the value of my flat.
Should i accept his offer, or just not bother extending at all as I might sell in 2-3 years time anyway? If it makes any difference (maybe it does morally!) I think he has fallen on hard times and needs some cash!!

Many thanks for any help
HP.

tobes001

If you do not extend then when you come to sell in 2 years then the lease will have just over 70 years left. This will make the flat more difficult to sell than if it had 99ish years to go. It would also make the value of the flat less.

I would suggest that £8,500 may be too expensive, but if you do not extend, it may cost you more because of the difference in value when you come to sell.

Offer the freeholder £5,000 and see his reaction. He may take it! if they do not see what his best offer is and then do it.

I would also advise getting 3 estate agents in to give you a valuation so that you know what the flat is worth with the existing lease length. Tell them you are thinking of selling then it is free!. Also ask them what the value would be with a 99 year lease. If it is more than £8,500 then the answer is obvious.

Good Luck

hedgehogpenguin

Thanks for that tobes. I was wondering whether lease extensions might generally be more expensive in London ?

cattie

£8.5k for an extension is a reasonable price I'd say. It will certainly add to the value of your flat. I know of your area & flats in the conservation area of Brockley are a good buy.

Prices in London have seen a significant increase this year, so I don't think there is any danger that you will lose out when you come to sell. The longer lease is going to make your flat appeal to far more buyer's than one of under 75yrs will. Don't hesitate, do it!

EdInvestor

8,500 or less sounds like a good deal.:) Can you put it on the mortgage?

hedgehogpenguin

Right, I think I'll try offer him 5 or 6000 and see how it goes. I think I can get the loan for the 8500 no problem, but am just worried as to whether it is necessary at all to extend or should I just leave it.

cattie

If you are thinking of selling at any time in the future then the lease extension is a must, otherwise you'll possibly end up with a flat that is not only quite difficult to sell, but that will only achieve a very low selling price. By increasing the lease you'll ensure you get the best possible price for your flat should you decide to sell sometime within the next few years.

Leases under 80 years are not a good proposition anyway & there are lenders who will not consider granting a mortgage on a property if there are less than 65yrs remaining on the lease.

Petelud

My son has a flat in Neasden, London and he is looking at selling. He has lived there for 6 years. The current lease has 72 years to run and the annual ground rent is £50. An estate agent suggested extending the lease. I wrote to the landlords on his behalf and they indicated that to extend it to 99 years (an additional 27 years) they gave me a figure of £16,500 with the ground rent rising to £250pa., doubling every 20 years. They will also charge £600 for admin, plus £300 for initiation (whatever that is) plus £50 per document.

I saw on an earlier post that the premium may be negotiable. Are the other figures also negotiable? Is it better to try and negotiate ourselves or to ask a solicitor or one of the companies that advertise on the web to negotiate for us. Would we expect to get a good reduction?
Many thanks to anyone who can offer advice.

mixu

https://www.lease-advice.org is your friend...

Petelud

Thanks.
I have had a look at their website and now rung them. They are going to email me some costs for getting an extension and and an estimate of whether the premium could be negotiated down.