renew lease on studio flat ..?

Sallysharp

Hi everyone - just wondered if anyone could help ... we have studio flat with a 66 year lease on it - we have agreed to a lease extension of 90 years with the freeholder that will cost us £10,000 plus solicitors fees of £2,000 approx both parties - no increase in ground rent - currently £50
we are paying for it all vie re-mortgage of the flat but I read somewhere that the Government are planning to change the laws regarding costs of lease extensions.... should we hold off or is £10,000 a good deal for an extra 90 years.... we have no plans to sell as this is our pension in 15 years time
any advice greatly appreciated

hazyjo

Hard to say without knowing the property price, but it sounds reasonable/cheap to me.

princeofpounds

All the government have announced is a political intention to introduce some more leasehold reforms. One stated political goal of the reforms is to make lease extensions easier and cheaper (note - 1% cheaper is still cheaper; political language is precise for a reason - it leaves lots of flexibility as to what outcome is eventually delivered). There is no legislation, no draft legislation. There is a Law Society consultation on which some recommendations will be based, but we have no idea how much of it.

Basically, any material change is probably on the scale of years, not months, away. Something probably will happen, but it may well be watered down, or the political direction might change. And we have little idea of what it might be.

So basing any decisions on it is a fruitless exercise, especially in your situation where time is money with a short lease.

As for whether your deal is a good deal. You need to compare it to a valuation based on the formula used in the statutory process if you were to extend at Tribunal. Because that is the other option you have compared to a negotiated informal purchase. Calculators like those linked below can give you an idea; they aren't exact, particularly if your ground rent is not static or your lease is very short. But it will give you a ballpark sense.

The likelihood is that £10 is actually a very reasonable valuation, unless your studio flat is relatively cheap.

http://lease-extensions.org.uk/calculator.html
https://osborneslaw.com/property-law/leasehold-extension-calculator/

Chandler85

Why are the increased lease lengths now so short.  They were 999 years a long time ago, then 250 years, then 125 years and now leases get increased to 90 years and the freeholders know that under 85 years some mortgage lenders don't like.

Maybe this is the magic money tree that the government were looking for. 

SallyDucati

Chandler85 said:

Why are the increased lease lengths now so short.  They were 999 years a long time ago, then 250 years, then 125 years and now leases get increased to 90 years and the freeholders know that under 85 years some mortgage lenders don't like.

Maybe this is the magic money tree that the government were looking for. 

In this case an additional 90 years is being added (statutory route I presume) so the lease length will be 156 years, and will be some time before the 85 years mortgage issue raises it's head. 

stefaniabruni8

Hi everyone,

I am in shared ownership with a Housing Association under an old scheme, DIYSO. The freeholder of the property is a local authority.  I have 90 years left on the lease and I was thinking of extending it. I understood that the council would add another 90 years on the lease.

Since there have been talks about the new reform, I feel confused and not sure if I should go ahead and extend the lease now or I should wait a few years (how many?..)  until the new reform gets into place.  I would like to understand what would be the benefits for me if I wait and what would be the savings in doing so. I only pay £10 a year for the ground rent.

Would the surveyor, legal  and the price of the lease itself be lower?

Would the property, in case I decide to sell be valued more with a 990 years old lease rather than 180 years that I would get if I extend it now?

Should I decide to sell before the reform is in place and with 87-88 left on the lease, would the property value be affected?

I would be grateful for any suggestion

princeofpounds

Chandler85 said:

Why are the increased lease lengths now so short.  They were 999 years a long time ago, then 250 years, then 125 years and now leases get increased to 90 years and the freeholders know that under 85 years some mortgage lenders don't like.

Maybe this is the magic money tree that the government were looking for. 

Lease lengths of all sorts of different types have always occurred. And remember it's an extension BY 90 years, not TO 90 years.

If you are not extending through the statutory process, the lease length, price and ground rent is entirely down to negotiation. 

The statutory process is a very good deal for leaseholders; freeholders have essentially had the right to have the property back at the end of a long lease taken away from them over the years. Now the payment is a fairly token amount unless you get below 80 years (which is when the actual value of the property starts to get take into account through something called marriage value). It's been one of the biggest transfers of wealth in British history and people seem to pay almost no attention to it. 

Consequently freeholders will often offer similar terms to the statutory process when pushed - like a 90 year extension - to avoid the bother of tribunal. But why would you offer more than that?

NameUnavailable

The govt. changes IF they actually happen include mandatory lease extensions to 999 years.

The nearer we get to a general election the less chance there is of much happening and the Tories have enough on their plate at the moment with Covid and kicking the tax rises/spending cuts, that we must surely have, down the road long enough so most of us don't feel any impact before the next visit to the ballot box!