Lease extension question

ewicc

I have owned my maisonette since 2006, the lease is now 84 years. The freeholder is a large housing association, I pay a small ground rent which covers the buildings insurance each year and nothing more. I am looking to extend the lease now. Should I contract the freeholder and send an informal letter asking about the costs of extending the lease or would it be better for me to get an solicitor to go down the statutory route, getting surveyor to value my marionette etc?
What would be the best way to extend the lease please? Is worth informally asking and see what they say, how much etc and then contact a solicitor and see what the statutory route costs would be? I know roughly the price of my place is as flat next door sold recently. 
Thanks in advance

eddddy

You can ask the freeholder informally. A few things to bear in mid:

• The freeholder doesn't have to reply to your letter, if they don't want to
• Some freeholders will ask for a fee for preparing a quote
• There is no law saying that the freeholder's quote must be sensible or realistic - it may be ridiculously high
• Check the extension terms that the freeholder is offering - a statutory lease extension would add 90 years to the term and reduce the ground rent to zero
• But you would save fees, if you can reach an informal agreement 

ewicc

I have 83 years on the lease left now. If I go down the informal route, it will increase my lease to 125 years plus I would have to pay a ground rent of 100 per year. I would have to pay the surveyor’s fee and legal costs for the freeholder and administration fee of £195 (plus VAT) to get their Lease Extension Offer.

If I go to down the formal route it will add 90 years to my existing lease, extending it to 173 years and will pay no ground rent. But cost more in terms of legal fees and the cost of potentially two surveyors etc.

How much difference would having an 173 year lease on the flat have as opposed to having an 125 year lease  have on the value of the flat, given both are pretty long would it be negligible?

 Also as the cost of extending the lease is linked to the value of the property, given currently circumstance and what most
people are thinking that property prices will drop, would it better for me to wait several months or a year and extend the lease then when the value of flat will be less?

Socajam

I would wait until what we are experiencing is much clear - and say within 6 months see where property is.
That should give you a clearer picture

sukavi2011

Hi
my situation is very similar to ewicc except my lease is 87 yrs, freeholder is local authority and very low ground rent. i have lived in maisonett 3 yrs and want to extend.  I dont understand the informal and statutory routes and want to know should i approach solicitor first or freeholder, ive read that it can be over 10k appr or more, I havent long left on mortgage but want to avoid increasing if possible as late 50s so working years not really on my side. is there a way of finding out the costs before i start the process?

ewicc

Given that there will be a change in leasehold extension policy (https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes) is it worth me waiting to see when this will come into effect or just extend now?
The price of properties around my way have not gone down so far during the pandemic, if anything it has increased,
I have read that it might take up to 2 years for this law change to come into effect (https://www.knightfrank.co.uk/research/article/2021-01-08-leasehold-law-changes-how-will-the-property-market-react#), should I wait or just extend my lease now??

NameUnavailable

The Govt are considering changes but nothing is agreed yet and how long it will take to come into effect (if at all) is anyone's guess.

If you are thinking of selling in the next few years I would extend. I'd be inclined to go down the statutory route depending on what the freeholder has asked for to extend only to 125 years and continue charging ground rent. If it's a much lower price than the calculators suggest then maybe it's worth it, if he's asking the same sort of cost I'd get the longer extension.

Also just to correct your first post, ground rent is just ground rent. It won't include insurance. Whatever you pay currently is ground rent PLUS insurance.

ewicc

Thank You.

Another question, is the approx amounts quoted on the leasehold calculators, for the informal or formal route?

Slithery

ewicc said:

Thank You.

Another question, is the approx amounts quoted on the leasehold calculators, for the informal or formal route?

Formal.

If you go for informal the the freeholder can come up with any number they wish so is impossible to calculate.

ewicc

Anyone know what the rough solicitor/legal costs would be for going down the formal route please?

eddddy

ewicc said:

Anyone know what the rough solicitor/legal costs would be for going down the formal route please?

Probably £3k to £5k for the legal and valuation fees - that covers your own costs and the freeholder's costs (which you have to pay)

But it could be much more, if you end up going to tribunal.

So, as an example, if the calculators say your extension cost is about £10k - maybe you'd consider informally negotiating up to £11k or £11.5k, because the fees you'd pay should be much lower, if you take the informal route..