Lease extension, what do we do?

Skippy13

We have a flat with a short lease (54 years) and, thanks to an inheritance, we are finally in a position to extend with a view to selling.  After yesterday's announcement from the government has thrown us.  I've not been able to find out when the new legislation comes into effect so we don't know whether to start the ball rolling or wait.  We're currently looking at £42k plus to extend the lease so waiting could save us money, but if the legislation doesn't go ahead for some reason we'll end up spending a lot more.  Waiting will also delay us being able to move, and we're keen to go sooner rather than later.

I've had good advice on here in the past and I was wondering if anyone had any thoughts or suggestions.

newdriver101

It is just a proposal by the government. It’s a nice headline but there is absolutely no detail yet on who it applies to or how it will work. Current legislation will have to be amended or repealed which takes time.  I would be surprised if we get any further detail (or timescale on implementation) this year... 

My advice is don’t hold out for this new legislation - it’s not clear if or when it will come into force and who it will apply to...

anselld

The gov statement gives clear indication that marriage value (which is mainly what drives the cost up on short leases) will be abolished, however they do not say what will replace it or when.  It would be fairly safe to assume whatever it is would save you money and give you a much longer extension if you are prepared to wait.

Skippy13

Thanks for the replies.  The problem with waiting is we really want to move.  I also begrudge the freeholder every penny of the money so we're between a rock and a hard place!  Why can't the government give more information rather than dangling a carrot?!  

Grumpy_chap

Can the OP afford the £42k?

There could be a change in the law that could make future acquisition cheaper.  (Or maybe more expensive - who knows?).  No details and no timeframe.  Is it a Government priority what with needing to manage COVID and trade rules right now?

In the mean-time, as the number of years reduces, the cost increases exponentially once less than 80 years.

There could also be intervening case law that changes the valuation protocols (in either direction).  This happened to us - we got a valuation in Summer 2019 then procrastinated until March 2020 and the cost had gone up loads because of a valuation tribunal decision that set new precedent (right through the levels of the Courts).  We were fortunate that our Freeholder agreed only a nominal sum to reflect the change, and waived the majority of the uplift.

Sometimes, you have to put on your Nike and Just Do It!

anselld

You could try an informal offer.  The Freeholder might be spooked enough by the gov announcement to cut you a good deal although it is impossible to know what good looks like now.

Skippy13

Yes, we're fortunate enough to be able to afford the lease extension now.  I think you're right about just doing it, knowing our luck we'll wait and end up paying more!

Unfortunately our freeholder isn't easy to negotiate with so I don't think he would accept an offer.  We went down the informal route a few years ago but pulled out when he increased the ground rent to £250 with a doubling clause (I can't remember how often).  

princeofpounds

This is everything that has been announced so far (link below). The government first said it was looking at this (this time around!) in 2017, so those are the kind of timescales we are moving on. However, it seems to hint that the first legislation could arrive quite soon:

"Legislation will be brought forward in the upcoming session of Parliament, to set future ground rents to zero. This is the first part of seminal two-part reforming legislation in this Parliament. We will bring forward a response to the remaining Law Commission recommendations, including commonhold, in due course."

But much of it will be in 'due course' i.e. many of the reforms are probably still years away and may never happen in the current form envisaged.

Don't think that this will necessarily make everything cheaper for all leaseholders. Just because they propose to 'abolish marriage value' for extensions of short leases doesn't necessarily mean that cost will go to zero, for example. Although overall it probably will be beneficial.

https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes

SuperHung

My flat is also on a short lease, 70years. I am going to keep waiting, according to the reforms, they will make the extension 999 years, no ground rent & no marriage value. If not, I will just outlive the freeholder.

Skippy13

We thought about staying here any outliving the freeholder but we really want to move on.  There's nothing wrong with the place, we've just outgrown it and really need extra space and a driveway.  My job is making me ill so we want to take the plunge with a completely fresh start in a different area.  

eddddy

SuperHung said:

 If not, I will just outlive the freeholder.

Skippy13 said:

We thought about staying here any outliving the freeholder but we really want to move on.  

If you literally mean "outliving the freeholder", as in the freeholder dies - that's not really relevant. It wouldn't change anything.

If the freeholder dies, the freehold property will be sold or passed to their heirs - so you will simply have a new freeholder.

Or the freeholder might sell the freehold property at any time - long before they die. So again, you would have a new freeholder.

You and the other leaseholders might even want to consider buying the freehold yourselves.