Lease extension

Suzieclow

Hi
I am in the middle of a lease extension and have been given the following offer. Any thoughts on the 33 year rent doubling? They tell me this is to help me achieve an affordable solution but I think long term it’s going to cost me more.

“They are prepared to offer two proposals
A premium of £20,000 for a new 99 year lease, being the same term as the original lease, with a peppercorn rent
A premium of £17,500 for a lease to 125 years with a peppercorn ground rent for the next 5 years and there after £250 doubling every 33 years

both offers are plus statutory costs.”

Also what are the statutory costs he refers to. And how much should I be paying for the land registry?

Sorry for so many questions at once.

Thank you.

eddddy

How does that compare with the potential cost of a statutory lease extension? (And how long do you have left on the lease currently?)

A statutory lease extension would add 90 years to your lease at a peppercorn ground rent.

But the valuation and legal fees for a statutory lease extension might be much higher.

If you haven't investigated the costs of a statutory lase extension, there are many calculators on the internet, including:

https://www.lease-advice.org/calculator/
https://www.moneysavingexpert.com/mortgages/extend-your-lease (scroll down)

Beardmidget

I know nothing of statutory lease extensions, but if you were going to take one of the options the freeholder has offered, I would steer well clear of plan B- it creates a liability of £100375 across the life of the lease. I would get pretty nervous about this as a potential buyer (or probably conveyancing solicitor)

Tom99

[FONT=Verdana, sans-serif]You don't say what your current unexpired term and ground rent are so its difficult to say.

[/FONT] [FONT=Verdana, sans-serif]As above, compare the offer to the likely cost of a statutory lease extension.

[/FONT] [FONT=Verdana, sans-serif]I assume saying you will still be liable to statutory costs means the inflated valuation and legal fees of the freeholder.

[/FONT] [FONT=Verdana, sans-serif]One thing is certain, this offer is not made out of the goodness of their heart to give you an affordable solution. It is to benefit the freeholder.[/FONT]

bouicca21

Option b really isn't that cheap. If you want to go for it, I'd suggest negotiating that premium down considerably. Also try getting a cap on the ground rent at £1,000.

Suzieclow

I don!!!8217;t know about statutory leases I will look at that now.
We currently have 57 years remaining on our lease.
Thank you so much for confirming our thoughts much appreciated

Suzie

Tom99

[FONT=Verdana, sans-serif]At 57 years your current lease is probably un-mortgageable so would only sell to a cash buyer.

[/FONT] [FONT=Verdana, sans-serif]If your ground rent is fixed you can get an idea of a statutory lease extension price from the calculator above.

[/FONT] [FONT=Verdana, sans-serif]Given the 57 year term I would expect the premium to be quite high as you will have to pay 50% of the marriage value.

[/FONT] [FONT=Verdana, sans-serif]If you decide to go ahead with a statutory extension you will first need to employ an RICS surveyor to value the flat and extension price and advise what figure to put in the Section 42 notice to the freeholder. You will need a solicitor to prepare the Section 42 notice.

[/FONT] [FONT=Verdana, sans-serif]Once you have served that notice you are responsible for the landlords costs even if you later pull out because the price is too high.[/FONT]

Suzieclow

Thanks Tom. We have served the notice and paid surveyors fees. Just at negotiation stage now.
I will never buy a leasehold property again, such an unfair and stressful process

Once again I appreciate the advice

Suzie

eddddy

Suzieclow wrote: »

Thanks Tom. We have served the notice and paid surveyors fees. Just at negotiation stage now.

There is some confusion here.

If you served a notice (i.e. a section 42 notice) you are doing a statutory lease extension.

So neither of these options are relevant:

Suzieclow wrote: »

They are prepared to offer two proposals
A premium of £20,000 for a new 99 year lease, being the same term as the original lease, with a peppercorn rent
A premium of £17,500 for a lease to 125 years with a peppercorn ground rent for the next 5 years and there after £250 doubling every 33 years

Those two options would be for an informal lease extension. And if you are doing an informal lease extension, there is no notice to serve.

If you have served a section 42 notice, you will get a 90 year lease extension at zero ground rent, and you will have stated on the section 42 notice what you are offering to pay for the extension.

So you need to find out if you are doing a statutory lease extension.

economic

A doubling of GR every 33 years is about 2% a year. Its actually better terms then my previous property which doubled every 25 years and i thought that was reasonable.

I would probably go for the 125 year lease as if you sell it soon then you are paying a smaller premium upfront. If you stay there for a long time, then with a 99yr lease you are more likely having to extend again.

But work out what the "fair value" is from online calculators and compare. Maybe statutory route is better after any further negotiation with the FH.

economic

Beardmidget wrote: »

I know nothing of statutory lease extensions, but if you were going to take one of the options the freeholder has offered, I would steer well clear of plan B- it creates a liability of £100375 across the life of the lease. I would get pretty nervous about this as a potential buyer (or probably conveyancing solicitor)

you are right, you dont know anything about lease extensions.

The £100k you quoted is not a present value, and although it sounds big, paid over a 125 year period its not nearly as big. Also you assume the OP will be paying it for 125 years. Will he/she really have a life expectancy that by far beats all world records?

The GR the OP would have to pay is actually one of the better terms i have seen.

As always, the OP should find out the fair value and compare to what is being offered. In general you either pay more premium upfront and less GR, or vice versa.