Lease Extension

Skippy13

We are currently in the process of extending our very short lease and adding my name. We received the draught lease today and changes to ground rent immediately jumped out.

We currently pay £70 a year for ground rent and this is due to go up to £105 in 2043 for the remainder of the lease. Ground rent in the new lease goes up immediately to £250 and doubles at certain periods and, by the end of 99 years, will be £2000.

Needless to say we're not happy with this. We don't want to pay such a huge increase and we're concerned it's going to make the property difficult to sell. We're already in a situation where we can't sell due to a short lease (57 years) so we seem to be stuck between a rock and a hard place.

My husband is going to speak to our conveyancer but does anyone have any experience (preferably good!) of getting the freeholder to amend the terms of the lease?

Thanks in advance

eddddy

What you're doing is called an informal lease extension.

The negotiation is like buying a house or car. The freeholder has 'offered' their price and terms, you can now 'offer' your price and terms.

But neither side can force the other side to accept their offer.


It's likely that you'd get a better price by doing a statutory lease extension, but the legal/valuation fees would probably be much higher.

Some more info: https://www.lease-advice.org/article/lease-extension-of-leasehold-flats-the-two-routes/

Skippy13 wrote: »

My husband is going to speak to our conveyancer...

A conveyancer may have no experience of lease extensions.

It may be better to speak to a solicitor or valuer who specialises in lease extensions.

economic

Assuming its a new 99 year lease and not 99 years adding onto existing lease, the 250 GR rising o 2k at the end of the lease is on average an increase of 2.1% annually (compounded). This doesnt look too bad, in fact i would say its a reasonable average rise annually.

Of course if it rose to 2k say half way through the lease and stayed the same throughout that wouldn't be nearly as good as it seems so do provide full details of the GR schedule.

But assuming schedule looks "normal" i would say the GR schedule is not a problem.

Of course its the overall deal that matters which depends on the value of your property (assuming long leasehold), the premium you will pay for the lease extension and how long left on the lease.

economic

I would also always be a bit wary of new leases of length 99 years unless you plan to sell within say 10-15 years. If its veyr long term then you will have to eventually extend again.

It all depends on what you are paying for it and compared to the price of a lease extension using "fair value" calculators and assuming 99 years ontop of existing lease and peppercorn ground rent.

Skippy13

Thanks for the replies. The lease extension is from 57 years to 99 years. We currently pay £70 a year and the increases are as follows:

With immediate effect until 2043 - £250 pa
2043 - 2068 - £500 pa
2068 - 2093 - £1000 pa
2093 until expiry - £2000 pa

We are paying £32000 plus costs to extend the lease.

eddddy

A statutory lease extension would add 90 years to the term (so 147 years total) and reduce your ground rent to zero.

You can get an idea of the cost of a statutory lease extension using one/some of the online calculators:

https://www.lease-advice.org/calculator/
https://www.moneysavingexpert.com/mortgages/extend-your-lease (and scroll down)
http://www.myleasehold.co.uk/lease-extension-calculator


(But fees would probably be higher.)

Tom99

99 year is far to short, the freeholder will be looking to collect yet another lease extension premium in say 15 yrs or so.

Unless you are planning to sell soon I would go for the statutory extension.

Skippy13

The problem we have is we are on a tight budget. My Mum died last year and we have used my inheritance to clear the mortgage and we have just enough left to extend the lease at the current price. If the cost goes up by too much we won't have the money to extend.

Tom99

You can always use the threat of pulling out and going the statutory route to try for a better deal.

Skippy13

I think that's what we'll end up doing. My husband has spoken to the conveyancer who doesn't seem impressed we're not just signing. She's going back to the other solicitor so we'll see what happens next week.

eddddy

Skippy13 wrote: »

I think that's what we'll end up doing. My husband has spoken to the conveyancer who doesn't seem impressed we're not just signing. She's going back to the other solicitor so we'll see what happens next week.

Why is a conveyancer involved?

If I understand your post correctly, you're not buying the flat - you're just extending the lease.

As I said before, a conveyancer might not understand lease extensions, and might not be able to give you good advice.