Unfair Lease Extension Offer

eddddy

tomryan89 wrote: »

So from where I'm standing, and based on the advice in this thread, my best option is to have my solicitor negotiate informally with the management company which would hopefully reduce the ground rent to make it more attractive to buyers but probably result in me having to pay over the odds on the lump sum.

Sound right?

A solicitor doesn't normally negotiate things (but I guess your solicitor could be different).

It's more like buying a flat - you negotiate the price (and terms) with the seller, and then tell the solicitor what you have agreed.

If you want to give the negotiations more 'gravitas', you could get a valuation and report from a RICS lease extension valuer. The valuer would tell you what you would probably pay going down the statutory route.

You could then say to the freeholder...

"If I went down the statutory route, I would probably have to pay you £x. I'm prepared to pay you £x + £2k for a quick deal. (On the same terms as a statutory extension)"

tomryan89

Hi everyone thanks so much for the advice, again.

So I've had my solicitor sort out a surveyor​ for us to value everything up. My plan is, once armed with the information from the surveyor, to negotiate from an informed position with the freeholder / management company.

My key aim will be to get a reasonable agreement on the ground rent and I'm prepared to pay a slightly higher premium to get there.

Will update as we move forward!

starshapedbrick

tomryan89 wrote: »

Hi everyone thanks so much for the advice, again.

So I've had my solicitor sort out a surveyor​ for us to value everything up. My plan is, once armed with the information from the surveyor, to negotiate from an informed position with the freeholder / management company.

My key aim will be to get a reasonable agreement on the ground rent and I'm prepared to pay a slightly higher premium to get there.

Will update as we move forward!

We employed our own surveyor - and paid them to do the negotiating for us - result was a 40% reduction in the price we paid for the sake of a couple of hundred quid. Worth considering if they are going to be doing the valuing anyway and I felt it was better to put a professional in charge of negotiations for this given the difficulties I always had with my management company. Good luck!

stator

Hoploz wrote: »

I would just market the flat at a standard price, then when it comes down to negotiations be prepared for someone to knock a little off if it's brought up.

You are over-worrying I believe. 82.5 years is not a problem. The lease will become the next owner ... Or indeed the owner after that's problem.

With only 82.5 year it's already a problem. Going to put off a lot of buyers, especially if the market is first time buyers and young couples (as most flats are aimed at). Might not put off cash buyers, but there aren't many of them in the market. Even most landlords have mortgages.

Definitely get it extended. Either negotiate what they are asking or start the statutory process straight away. Or both, (if that's possible, talk to your solicitor). Definitely DO NOT tell the freeholder that you are desperate to sell, don't mention anything about selling at all. Give them no information except that you can to extend

If you're desperate to move you could consider renting it out whilst the lease extension is ongoing. But I don't know if that's financially viable for you.

da_rule

If you go down the formal route and serve a s.42 notice you can pass the right to extend on to the new owner (should you sell before the new lease is completed). This means that the new owner will not have to wait the statutory 2 years before they can commence proceedings. It does however mean that they will have to either stand by the value you suggest (or agree to) as the premium. However, as you are instructing a proper valuer (rather than just plucking a figure out of thin air) then the value you suggest will (hopefully) be a fair valuation.

tomryan89

Good ideas once again team. Looks like I've got a great Solicitor who is booking us a valuation - looks like the service I've singed up for includes negotiation but I need to calcify whether this is just for the statutory process. If not, hoping my surveyor will negotiate us a good deal.

I haven't told the management company that we are looking to sell. They asked and I said no!

If I need to negotiate myself, I'm going to do it armed with the report from the valuation and plan to engage like this:

"Look, you want a high premium with an increasing ground rent. I want a low premium with a ground rent that would be acceptable to my mortgage provider when it comes to re-mortgage . We both want to avoid the statutory process. Let's figure out what a fair premium and ground rent agreement would be using the objective standards from the valuation.'

NRY

Good luck, and keep us posted!

always_sunny

but why don't you extend using the formal route?
It may take longer (12 months) but that doesn't' prevent you from selling while it is happening.

Without knowing the specifics (location, size, etc) the offer may not be bad, GR (£350) might put off people more than the cost of formal route extension and 82.5 years left it's that ugly amount that if someone buys it, they will need to wait 2 years and pretty much forced into higher cost cause of marriage value.

Anything that has GR more than 0 is too much.

tomryan89

Going the formal route so that when someone buys it they don't need to wait two years is certainly an option and I am definitely not ruling it out but I would need to discuss with the buyer.

The only thing stopping me from doing this right now is that it's a one bedroom flat which means a buyer will probably be a first time buyer. Any thing that makes them nervous, like an ongoing lease extension process, is bound to make them more nervous than other experienced buyers. Hence why I'm trying to avoid it.

Okrib

I sold several flats either with shorter leases or where the lease was in the process of being extended through a Section 42 notice.

The section 42 process itself should take between 6 months and a year, depending on how responsive the freeholder is. Importantly, you should get a relatively accurate figure from the surveyor as to what the cost will be (and in my experience it usually ends up less than the figure they quote – this may not be entirely coincidental given that they will often base their fee on the % saving they make in negotiations)…

Whatever you do, do not do it informally. This will only ever benefit the freeholder.

When you have a figure from the surveyor for the extension cost, you can factor this in to your marketing price, and the incoming buyer will be buying a flat with a lease of 172 years and no ground rent. Make sure the buyer’s solicitor fills out the form when it comes to the exchange of the Section 42 right, because if the form is wrong the notice gets cancelled, and you could be held liable for that (the solicitors should do that automatically anyway).

I’m also very surprised that you can have an offer on a property accepted when you’re not in position to proceed (assuming you need to sell to buy). Because you can’t buy that house without selling this flat first.