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RAS

Might be worth spending £6 downloading the documentation for the flat and the one next door that sold last year, form the Land Registry?

Before going any further.

MaryNB

Bear in mind, the freeholder may change their mind about extending the lease after your friend has bought it. Your friend may then be forced to wait 2 years before going down the statutory route, which at a ground rent of £1.1k and post extension value of £200k, could cost them upwards of £23k plus legal fees. 

eddddy

AskAsk said:

we would not be buying the flat without the statutory lease extension as part of the sale as i don't think it is a good idea to agree to a 125 years lease on £1,100 pa ground rent full stop, reading through the comments to this post.

i had looked at the calculator you mentioned and it stated between 22k - 25k plus costs.  so that would be the benchmark.

Do you mean you want the statutory lease extension process started before you buy the flat (i.e. a section 42 notice served)?

Or do you mean you want the statutory lease extension process completed before you buy the flat?


A statutory lease extension typically takes between 6 and 18 months to complete. (Due to COVID etc, a recent lease extension took over 2 years.)

If you want the seller to complete it before you buy - the seller would need to have access to £30k+ in cash.

If you want the seller to start it before you buy, and you complete it - you would need to have access to £30k+ in cash.

eddddy

AskAsk said:

you say 30k+, that means costs in addition to the lease extension cost itself is more than 5k?  for the valuation and legal fees?

Yes - especially if it ends up at a Tribunal. And you won't know the exact cost of the lease extension in advance - it could end up costing you more than you expect.


Your valuer will probably give you a report saying something like - if it goes to tribunal:

• Best case outcome is £19k
• Worst case outcome is £28k
• Most likely outcome is £24k
• We recommend that you make an initial offer of £17k

And the freeholder's valuer might say to the freeholder - if it goes to tribunal:

• Best case outcome is £30k
• Worst case outcome is £21k
• Most likely outcome is £27k
• We recommend that you respond to their initial offer with £32k

So you offer £17k, the freeholder responds with £32k. And your valuers start negotiating.

If you can't reach agreement and you end up going to tribunal - your costs could be over £5k. And if the tribunal decision doesn't go your way, the cost of the lease extension might be, say, £28k - when you expected it to be £24k.

eddddy

AskAsk said:

i thought the statutory process would be dealt with by a government body, who will calculate the lease extension price.  but from what you say, the statutory process is still a negotiation between the two parties and only go to tribunal if both parties do not agree to the price?

Yep - that's correct.

There's a statutory formula for calculating the price - but it has variables. For example,

What's the marriage value? (i.e. what is the flat worth today without a lease extension, and what is it worth with a lease extension.)

• One valuer might say it's worth £180k before the extension and £190k after the extension
• The other valuer might say it's worth £170k before the extension and £200k after the extension

The freeholder was due to get the flat back in 74 years, but will now get it back in 164 years? What is the monetary loss because of that? (TBH, that's usually assumed to be not very much.)

Plus compensation for loss of ground rent etc.


At a tribunal, each valuer would put their case (e.g. "I think the flat is currently worth £180k because of a, b, c etc), and the tribunal would decide who they agree with.

bouicca21

If you are serious about this property I think you should be asking to see a copy of the lease.  I can’t get my head round such a staggeringly high ground rent.