Administrator extending lease before selling - allowed?

Blox55

The estate consists of one flat and a freehold land to this flat and the flat above it (the flat above was sold to a third party 30 years ago and is not part of the estate).

The flat which is part of the estate has lease just over 50 years remaining which makes it not fit for a mortgage and therefore not really sellable.

Since administrators are dealing with both, the freehold land AND the leasehold flat (which is is one of leasehold properties sitting on that freehold land), are administrators allowed to extend the lease to that flat (to lets say 99+ years) so that it makes the flat that is part of the estate more sellable?

Obviously this will devalue the freehold land part, but devalued freehold land + flat with extended lease is more worth than trying to sell flat with a very short lease + freehold title separately.

I guess I am asking - what are the powers administrators can do? Can they do anything that is the best to maximise the value of the estate for the benefit of beneficiaries as long as it is done within a reasonable time?

Keep_pedalling

It would be a problem if there was a separate free holder, but I don’t think there should be a problem here, although I thing you might get better answers asking on the housing board.

JGB1955

Blox55 said:

I guess I am asking - what are the powers administrators can do? Can they do anything that is the best to maximise the value of the estate for the benefit of beneficiaries as long as it is done within a reasonable time?

I would think that that is precisely what they should be doing, otherwise 'someone' will be complaining that they executor hasn't maximised the estate.  Getting the balance right is tricky though, and executors are volunteers.... would you want the job?

Blox55

Thank you very much to both of you. This is what I thought would be the case but wanted opinions. My husband is administrator and we also have lawyer advising but the lawyer has proven useless so far so I would not trust he knows.

Marcon

Blox55 said:

Thank you very much to both of you. This is what I thought would be the case but wanted opinions. My husband is administrator and we also have lawyer advising but the lawyer has proven useless so far so I would not trust he knows.

In what way has the lawyer 'proven useless'?

Blox55

The lawyer has proven useless in many ways unfortunately.

Filled forms incorrectly that initially resulted in £100,000 larger IHT liability (thankfully we picked it up!) as he entered a wrong property not owned by deceased and also claimed only £100,000 instead of 175,000 transferable nil residence band.  

There were other mistakes too - I would attribute some of them to being sloppy. But when you are paying so much to a lawyer to advise administrators, you would expect to get some value for money.

Also, when asked how we can pay the IHT as the amount is large and we do not have the money to fund it ourselves, the lawyer did not advise on various possibilities, just said "go to bank and get a bridging loan" (and these are at 20% interest - if you can get them).

I would have expected that the lawyer tells us that there is a possibility to pay in instalments over 10 years for property part of estate. I would have expected the lawyer to mention "probate grant" concept, which although the last resort, HMRC may do when most of estate is in non-liquid assets. I thought we are paying for advice and not for someone to hold the pen and fills in various forms - and then on top of this, filling it in incorrectly.

Ultimately the IHT400 plus few other forms that the lawyer filled in did we could have done all ourselves and would not have made these mistakes. So we really got nothing of him/her.

Fortunately we have researched a lot and read many HMRC manuals online . 

Keep_pedalling

If you successfully do this you will face a question over whether the gain falls under GGT or IHT. With ownership of both within the estate HMRC might argue that the true value of the asset was the higher net value.

Blox55

There will be no gain. It is not that we are reducing the value of the estate by devaluing it. Instead the lawyer has put the property that was not owned by deceased on the form and incorrectly calculated nil rate band resulting in tax being calculated as £100K more. 

Also, regarding CGT, we will not have issue here - in fact the opposite. Unfortunately the valuation we got from RICS accredited person earlier in the year is much much higher than what now the estate agents say we can sell for. The issue is that the valuer has valued the house as "detached with two flank flats"  but it cannot be sold as detached since one of flats belong to third party, so we have to put it on the market as two properties: a semi and a flat which according to estate agents will result in over £100,000 loss from what the RICS valuation was. 

At the end will have to claim claim back overpaid IHT in the range of £40K - £50K once the properties are sold - we already looked into it. I'd rather sell it for what the valuation came up with and pay more IHT as we would then get more money too. We thought to re-value it but this has been going for so long now that we just want to get on with it and get the grant of probate.