Lease extension premium. Negotiations

Bio23

Hello all. I have just been informed by the surveyor that the premium to pay the leaseholder for my lease extension is £24,460. The no of lease  years left on my flat is 71 years. Anybody know if I can negotiate with the leaseholder. I cant pay that amount of money.  think I read it somewhere that the premium  can be negotiated.  

NameUnavailable

Whose surveyor? Have you made a formal application or is this just between you and the freeholder at this stage? Who paid for the valuation?

anselld

Have you tried the calculator?   https://www.lease-advice.org/calculator/
What does it suggest?

  You cant negotiate on the basis of what you can or cannot afford.  However, if that is the freeholder's opening offer you can negotiate if you are using the informal route, perhaps by arguing a different long lease valuation or discount rate. 

  If you have served s42 notice then it is a negotiation between your surveyor and the freeholder's surveyor and if they cannot agree you can ask the First Tier Tribunal to determine (but again what you can afford is not relevant).

greatcrested

Bio23 said:

Hello all. I have just been informed by the surveyor that the premium to pay the leaseholder freeholder for my lease extension is £24,460. The no of lease  years left on my flat is 71 years. Anybody know if I can negotiate with the leaseholder freeholder. I cant pay that amount of money.  think I read it somewhere that the premium  can be negotiated.  

Your ability to pay is irrelevant to the price. I can't afford £2,850 for a bottle of 1981 Chateau Lafite Rothschild Pauillac Premier Cru but that won't bring the price down.

If you are using the informal route, yes you can negotiate, though the freeholder's willingness to sell is more important than your ability to pay.

Or use the formal route.

https://www.lease-advice.org/faq/how-can-i-extend-my-lease/

NameUnavailable

Also bear in mind that as each year passes the cost to extend the lease will keep increasing, so there's not that much of an incentive for the freeholder to negotiate unless they're in need of funds now.

Bio23

NameUnavailable said:

Whose surveyor? Have you made a formal application or is this just between you and the freeholder at this stage? Who paid for the valuation?

My surveyor did the valuation. He is yet to send the valuation report to the freeholder.  It is just between me and the freeholder at this stage. I will have to pay for the valuation.  Dont know if my surveyor did a good calculation. 

princeofpounds

Assuming he is a proper surveyor, it should be a calculation based on the RICS standards. Whilst any surveyor may use slightly different inputs, the difference is likely to be relatively minor and there is as much a chance that it would be higher rather than lower.

Is he actually YOUR surveyor, or is he the freeholder's surveyor you are paying for?

When people talk about negotiations for lease extensions, the process typically goes like this:
- LH asks for extension
- FH comes back with silly high price
- LH reminds FH that they can extend at Tribunal using the statutory process and valuation
- FH comes back with much more sensible price, only slightly higher than the statutory process (sometimes they start with a sensible offer from the beginning if they aren't being shady)
- LH accepts offer to avoid hassle and expense of going to Tribunal.

It's not exactly haggling in the bazaar, and of course your ability to pay has no bearing on the result. Basically the statutory valuation formula acts an anchor to the price, preventing the freeholder from gouging you, but also acting as a floor price (because no freeholder would actually choose to extend at the formula price in a free market, as it's biased in favour of the leaseholder).

theartfullodger

greatcrested said:

....  

Your ability to pay is irrelevant to the price. I can't afford £2,850 for a bottle of 1981 Chateau Lafite Rothschild Pauillac Premier Cru but that won't bring the price down.

....

You surprise & disappoint me crested!

princeofpounds

Isn't Chateau Lafite what landlords pour on their cornflakes every morning before a hard day extorting tenants?

theartfullodger

Not me pal, Champagne.....

AdrianC

I prefer muesli to cornflakes, anyway.

Seriously, OP...

There are two ways to resolve your short-lease issue.

One is the statutory route - and @anselld gave the link to the calculator for that. That will give you +90 years on the lease, and a peppercorn ground rent. Below 80 remaining years, the lease becomes unmortgageably short, so the flat value plummets - "marriage value" rapidly increases the renewal cost, because the value of the flat is being materially affected by the renewal.

The other is informal negotiation. The freeholder can ask for however much or little they wish, for as long or short an extension as they wish, and as much or as little ground rent as they wish, with whatever increase schedule they wish. You may or may not find their offer poor value. You may or may not be able to come to a mutually-agreeable solution.

If neither of those routes are palatable, then in 2091 your lease will expire. This is why lenders do not like short leases...

How long have you owned the flat? What did your solicitor tell you about the lease when you bought it?