To renew or not to renew lease on flat

seven-day-weekend

My son has a flat with a short lease of about 60 years. We all knew about this when he bought it in 2012; the idea was that we would pay for him to have a statutory lease extension on it.

We know it is going to be expensive and have been given an estimated price of £10k plus ALL legal costs (the freeholder's as well as our son's) to get it 99 years. The ground rent which is now £37.50 p.a will change to £50 from 2042. These costs were estimated by an intermediary who was going to act on our behalf for the lease extension, but now is not going to.

The freeholders are quite frankly a bunch of crooks, for example they charged each flat £4k for major works, most of which have not materialised.

The flat is worth about £55-60k at present, with the short lease (my son paid £65k in 2012). He has no plans to move from it at the moment.

My question is - what happens if we don't renew the lease? I know there comes a point where no mortgage lender will lend on it - surely that will not matter at the value it has? My son has a mortgage on it for £40k, the repayment of which works out about half the cost of renting the same flat.

The lease will probably not expire in my son's lifetime, he is 38. He has no children to worry about it after he has gone. He is not married, but lives with his long-term partner, she is nine years younger than he is.

So - what do people think about the practicalities of not renewing the lease? Your thoughts appreciated.

eddddy

seven-day-weekend wrote: »

My question is - what happens if we don't renew the lease?

As the lease gets shorter, the flat just reduces in value.

• If the lease isn't extended during the next 60 years - the freeholder gets a big bonus (a profit) when the flat is handed back to them.

• If the flat is sold within the next 60 years to somebody who then extends the lease - that person gets a big bonus (a profit).

• If your son extends the lease, he gets the bonus (a profit) - and he can choose who he gives it to when he dies (instead of it going to the freeholder, or the next buyer).

Or if your son extends the lease, he can release the profit at some stage - e.g. by selling the flat when he's 65 or 70, moving into rented, and using the profit to fund his retirement.

seven-day-weekend wrote: »

We know it is going to be expensive and have been given an estimated price of £10k plus ALL legal costs (the freeholder's as well as our son's) to get it 99 years.

So that sounds like an informal offer from the freeholder. It doesn't seem like a good offer.

The online calculators suggest that you would get a better deal with a statutory lease extension. (90 years added to the term, nil ground rent - but higher legal and valuation costs).

See: http://www.myleasehold.co.uk/lease-extension-calculator

And: https://www.lease-advice.org/calculator/

seven-day-weekend

Thanks. The person who was going to work for us was going to negotiate a statutory lease extension, but didn't. The offer I have quoted is the latest one we have, and yes, it is an informal offer from the freeholder.

The freeholders said, when we asked about it, that if we insisted on going for the statutory lease extension, then they couldn't say how much their legal costs would be, but would be substantially more than if we took this offer.

I suppose it makes sense to do it. Just exploring all options!

StumpyPumpy

It sounds like they are trying to intimidate you with regard to their legal fees. Don't fall for it. Even if their costs went up by £1,500 you'd still be getting a much better deal going the statutory route. Plus once you put in an application the clock stops ticking, and everything is calculated on 60 years. Let the Freeholders mess you around for a couple of years before you put in the application and it will cost you even more. Not only that, but you don't need to carry on along the statutory route if the Freeholders make a more sensible offer, so set the ball rolling now, you can change your mind later if you want.

SP

seven-day-weekend

Thank you all for your help, much appreciated xx

forextc

Just as I note I went through a statutory lease extension about two years ago. I seem to remember that there is limit on the costs (in terms of legal fees) that can be applied, so you should have some safeguards.

From what you say, the £10k sounds reasonable. I ended up paying around £12k to renew on a lease with 80 years remaining so it hadn't hit the marriage period (just!). I was offered a lower deal by the freeholder but went with the statuary due to the peppercorn ground rent, rather than a rapid RPI hike which was proposed in their deal. While it I paid more, as it would have taken many years to recoup the additional amount from ground rent savings, I think statutory lease extensions make the property much more marketable when it comes to sell.

While the lease extension went through on the property with no problems or objections it still took just over 12 months to complete! I'm not sure if this is typical but it certainly didn't seem to be a quick process I'd second to putting in the application asap to stop the clock!

seven-day-weekend

Just to update the thread, we found another professional to negotiate with the freeholder on our behalf, and our son now has a brand new 125 year lease at a total cost (including legals) of £14.5k.

The ground rent has increased to £100 p.a., rising by £100 every 25 years. So after 50 years it will still only be £300.

This was an offer that worked out quite a lot cheaper than the statutory extension, and we have only got 18 years less. The ground rent charge seemed reasonable, so that is why we went with it.