Lease extension dilemma please help

Lucas78

I have owned a leasehold flat for about 20 years. It now has 68 years remaining on the lease. After a year of difficult negotiation through my solicitor and, mainly, surveyor I now have an offer from the landlord. I am at a decision point on whether to accept it or go to a Tribunal (the request papers are in – just in case I decide to do so) and would welcome advice.

My flat was bought leasehold and I currently pay a peppercorn “rent” to my landlord of £10 per annum. The value of my small one bedroom flat is estimated at approximately £170,000 pounds , with a long lease. Without a lease extension it is valued at about £20,000 less and falling. The last offer from the landlord is as follows:

1. Term of the new lease will be 120 years from the date of completion.
2. The ground rent payable will be £200 per annum payable on 1st January each year in advance.
3. The ground rent will double every 30 years on the anniversary of the 1st January.
4. The consideration will be £11,000.
5. I am responsible for paying the landlord’s surveyor’s costs which will be £875 plus VAT and will reimburse the landlord their legal costs in respect of dealing with this matter.

I have already clocked up a £850 bill from my solicitor (luckily I agreed a cap) and paid £600 to my surveyor. The landlord’s solicitors were only involved in service of the notices and given that all the other work has now been done by the surveyors on both sides, the only work remaining is to agree a standard lease extension deed between solicitors and to get the same signed and completed by receiving the money and any apportionments if applicable. This is all the landlord’s solicitors have to do. The tenant’s solicitors then have further work to do, namely to register the lease extension at HM Land Registry.

Drafting the deed is standard work which rarely involves many contentious matters. Usually the draft deed is agreed very quickly. I cannot see how the landlord’s solicitors costs could be any higher than £850 + VAT.
Which option would you take in my shoes?
1.Go back to the landlord yet again and try to cap his overall expenses e.g. to match those for my solicitor and surveyor?
2.Take it to a Tribunal (and thus incur more cost but possibly end up paying less (they may say my existing peeppercorn rent should remaun)
3. Accept it and cry?

Many thanks

foxy-stoat

Accept that these costs are part and parcel of owning a leasehold flat.

Pay it, sell up and buy a house - freehold.

eddddy

You've described the freeholder's offer, but you don't seem to say what your surveyor has valued the statutory lease extension at.

As you probably know, the statutory extension would add 90 years to your lease, and drop the ground rent to zero. So it will probably be more expensive.

Presumably, your surveyor is negotiating on your behalf, what does he/she say?

bouicca21

When i had negotiations over my lease, my solicitors expressed amazement at the legal costs quoted by the freeholder, which were double what they would charge for the same work. Fortunately in the end I didn't need to do anything, but it served as a lesson that freeholders will screw your over any way they can.

I must say though that £200 ground rent for a flat worth only £170,000 seems steep to me. It's not a lot less than I pay for a 3 bed in outer London. And, sigh, I too have the double every 30 years clause. Seems to be common for non statutory extensions.

ognum

Lucas78 wrote: »

I have owned a leasehold flat for about 20 years. It now has 68 years remaining on the lease. After a year of difficult negotiation through my solicitor and, mainly, surveyor I now have an offer from the landlord. I am at a decision point on whether to accept it or go to a Tribunal (the request papers are in – just in case I decide to do so) and would welcome advice.

My flat was bought leasehold and I currently pay a peppercorn “rent” to my landlord of £10 per annum. The value of my small one bedroom flat is estimated at approximately £170,000 pounds , with a long lease. Without a lease extension it is valued at about £20,000 less and falling. The last offer from the landlord is as follows:

1. Term of the new lease will be 120 years from the date of completion.
2. The ground rent payable will be £200 per annum payable on 1st January each year in advance.
3. The ground rent will double every 30 years on the anniversary of the 1st January.
4. The consideration will be £11,000.
5. I am responsible for paying the landlord’s surveyor’s costs which will be £875 plus VAT and will reimburse the landlord their legal costs in respect of dealing with this matter.

I have already clocked up a £850 bill from my solicitor (luckily I agreed a cap) and paid £600 to my surveyor. The landlord’s solicitors were only involved in service of the notices and given that all the other work has now been done by the surveyors on both sides, the only work remaining is to agree a standard lease extension deed between solicitors and to get the same signed and completed by receiving the money and any apportionments if applicable. This is all the landlord’s solicitors have to do. The tenant’s solicitors then have further work to do, namely to register the lease extension at HM Land Registry.

Drafting the deed is standard work which rarely involves many contentious matters. Usually the draft deed is agreed very quickly. I cannot see how the landlord’s solicitors costs could be any higher than £850 + VAT.
Which option would you take in my shoes?
1.Go back to the landlord yet again and try to cap his overall expenses e.g. to match those for my solicitor and surveyor?
2.Take it to a Tribunal (and thus incur more cost but possibly end up paying less (they may say my existing peeppercorn rent should remaun)
3. Accept it and cry?

Many thanks

I would go for paying more and getting a peppercorn rent and 90 years added to your lease. This to me is the way to extend a lease.

I have not purchased flats because of escalating ground rent. In the end it's your choice.

Lucas78

Thank you. My landlord would not go for 90 years and was originally looking at a figure of £14,800 for 120 years. My surveyor had proposed £10,486 for 120 years but that was before the landlords proposal concerning ground rent.
If we take the same approach to valuing the ground rent as I have in the capitalisation rate of 5%, the capital value to the Landlord of the ground rent is approximately £4,500 to £5,000.
The negotiations have stopped pending my decision.

Lucas78

Thank you eddddy, you will find my reply below

cloo

I know the pain of owning a leasehold flat... though he was difficult about other things, the freeholder was at least fair about the cost of extending the lease.


I must say, it sounds expensive. We paid less than that (about 5k + costs IIRC), based on a surveyor's valuation, to extend from 86 years to 125, in a flat worth just under 500k, but it's possible that there being less than 70 years on your lease, plus it obviously being more time than we paid for, might escalate the costs.

eddddy

Lucas78 wrote: »

Thank you. My landlord would not go for 90 years...

OK. But you do understand that you have a statutory right to a 90 year extension (at zero ground rent), and that's what you'll get if you go to the tribunal?

The only thing left for the tribunal to decide is the price.

And like I say, your surveyor will have told you what he expects a tribunal to decide is the price (for 90 years extension at zero ground rent).


Not surprisingly, your freeholder is trying to persuade you to accept a deal which is better for him, but probably worse for you.

From the limited information you've posted, the Freeholder's offer doesn't sound good.

System

Careful that the !!!!!!!!!! doesn't simply top up the lease to 99 years and actually ADDS 90, and be wary of ground rent. If you apply to tribunal the !!!!!!!!!! will be forced to negotiate an extension on STATUTORY terms, which will protect you. Been there, done that, feel your pain and hope I'm not forced to buy another flat

princeofpounds

Accept that these costs are part and parcel of owning a leasehold flat.

For the benefit of those watching, this 'advice' is wrong.


As Edddy said, you have the right to a long lease extension through the LVT process.


I agree with him (her?) that the question you need to be asking - and your surveyor should be able to answer - is whether the offer it cheaper from the freeholder or the LVT process.


The LVT process is a set procedure, and you can find out for a given set of inputs what the cost will be. Your input assumptions may not be followed exactly by the tribunal, but you can usually estimate it to reasonable degree via a surveyor and/or a competent lawyer.


You can also speak to lease-advice.org, a government-funded advice service, for free and they have guides on all this stuff.


My intuition is also that the freeholder is still offering a bad deal.


When you know the LVT cost, the normal course of events is to say to the freeholder "Look, I know I can get it for X via a tribunal. So how about I pay you X plus a little for convenience, and we move on"