lease Extension - how likely will it end up at tribunal

jimmy_boy81

Hi all


Just after a bit of advice. im selling my flat and basically I have 83 years left on my lease but due to buyer not being able to do anything for 2 years the agreement was for me to extend the lease.


I contacted the leaseholders, Freehold Managers PLC who I know have a bad rep, and after paying the £150 admin fee was told my premium would be £7549 plus solicitors costs. every website has told me the premium should be £3000-4200 tops. After going back and forth FM would not budge or even advise of any counter offers (It seems to be that because people have paid them this amount they think its justified)


So after agreeing with the buyer they would retain the amount quoted after sale and I would start the formal process under section 42.

What I wanted to know was has anybody pursued a formal section 42 notice against FM and if so how did you get on? How likely is the matter to get to a tribunal? Im mindful of the costs but £8100 seems ridiculous


Thanks in advance

eddddy

I don't know that company, but I suspect they've estimated that a Statutory Lease Extension would cost you about £4k premium plus up to £4k fees, and a few months of waiting - so they're offering to do it quicker for £8k.

Presumably their offer reduces the ground rent to a peppercorn, and adds 90 years to the term.

At the moment it sounds like you have deadlock. Maybe if you show that you're serious by serving a section 42 notice, they may start negotiating. (But just doing that can cost a few hundred in fees.)

jimmy_boy81

Thanks for the reply Edddy - no theyre not offering peppercorn rent theyre actually increasing the ground rent by a further £100 and theyre actually only adding 50 years onto the lease instead of 90


Ive attempted to negotiate with them by offering £3800, £4500 and £5000 and agreeing to their solicitor fees but every time i just get told it doesn't meet their valuation and no negotiations have taken place - their quote actually isn't very beneficial IMHO

AdrianC

jimmy_boy81 wrote: »

Thanks for the reply Edddy - no theyre not offering peppercorn rent theyre actually increasing the ground rent by a further £100 and theyre actually only adding 50 years onto the lease instead of 90

Ive attempted to negotiate with them by offering £3800, £4500 and £5000 and agreeing to their solicitor fees but every time i just get told it doesn't meet their valuation and no negotiations have taken place - their quote actually isn't very beneficial IMHO

There are two ways to increase the length of a lease.

Firstly, you can come to an agreement with the freeholder. There is no restriction on how they calculate the price they ask via that route. This is what you're doing no.

Secondly, you can go the statutory route. If the first is not reaching a mutually agreeable figure, you have to do this.

eddddy

jimmy_boy81 wrote: »

Thanks for the reply Edddy - no theyre not offering peppercorn rent theyre actually increasing the ground rent by a further £100 and theyre actually only adding 50 years onto the lease instead of 90


Ive attempted to negotiate with them by offering £3800, £4500 and £5000 and agreeing to their solicitor fees but every time i just get told it doesn't meet their valuation and no negotiations have taken place - their quote actually isn't very beneficial IMHO

Be very careful.

For their offer, will the ground rent rise in future years?

Agreeing to a 'bad' lease extension could reduce the value of your flat, or even make it unmortgageable.

It might be sensible to take professional advice before negotiating on an offer like this.

Going down the route of a Statutory Lease Extension will always be safe. (It may look more expensive, but it will almost always be better value.)

always_sunny

eddddy wrote: »

Going down the route of a Statutory Lease Extension will always be safe. (It may look more expensive, but it will almost always be better value.)

Even worth waiting the time assuming it does not impact the mortgage. 83 yrs should not!
My current sellers also received an informal offer and the terms were with ground rent (seems reasonable) that would double every 20 yrs.
When the costs are projected over the new lease length and compared to statutory route and peppercorn ground rent, the difference is HUGE!!!

princeofpounds

The terms on the ground rent and the length of extension are just as important as the price. You should have mentioned them right in your opening post!


If it had been for the normal extension terms, then I would have agreed that the fees do make it difficult to decide whether to bother with the tribunal route. But given you are being modestly shortchanged here on the terms, then yes it's probably worth initiating the tribunal route to save a bit of money or prompt a proper negotiation. Obviously investigate costs first.

jimmy_boy81

Thanks all for your replies - I made enquires with a local surveyor and he advised he dealt with a lease extension for a flat similar to mine and the cost was negotiated to £4800 (not including fees)

eddddy

jimmy_boy81 wrote: »

Thanks all for your replies - I made enquires with a local surveyor and he advised he dealt with a lease extension for a flat similar to mine and the cost was negotiated to £4800 (not including fees)

Good. And did you mention this bit to the lease extension surveyor (if it's still the case) :

jimmy_boy81 wrote: »

no theyre not offering peppercorn rent theyre actually increasing the ground rent by a further £100 and theyre actually only adding 50 years onto the lease instead of 90

It's really, really, really important - especially if the ground rent increases even more during the 50 years.

It can make a massive difference to the value.

Mokka

There has been a lot of warnings about voluntary lease extensions.

Some freeholders sneak very unfavourable terms, which ever solicitors miss. The worst is escalating ground rent. Under statutory lease extension the length of extension is always 90 years and ground rent drops to £0. During statutory extension it is illegal to change any terms of the lease.

There can be a lot of downsides to the voluntary lease extension. Firstly there is no legal right to informal lease extension, so the freeholder can withdraw or change the terms in the middle of negotiations.

Lease extensions are tax free income for the freeholder.

You can start the statutory process prior to the sale and your buyer would have the right to continue. Otherwise they'll have to wait 2 years.

Okrib

It won't end up at tribunal because the freeholder knows that the LVT is a set process and this will result in a smaller sum.


Run - don't walk - away from informal discussions with the freeholder. You will get done over, and cost you an absolute fortune.


Go through the formal channels, it might seem more complicated and more costly, but it has two absolutely huge benefits. Firstly, it protects you, and secondly, it will save you money.


I cannot believe people deal directly with their freeholder. It's a recipe for disaster.