Mortgage Rejected Due To Leasehold Ground Rent ....

eddddy

You can take a look at some past tribunal decisions to see what deferment rates and capitalisation rates have been agreed in those cases.

Go here: https://decisions.lease-advice.org/tribunal

And type in the search term Enfranchisement and select 1967 Act Decisions

Often, the calculation sheet is shown right at the end of the judgement.


The calculator you found uses different terminology. I think that deferment rate is the same as reversion rate, and capitalisation rate is the same as yield rate.

The capitalisation rate used seems to be between 6% and 7%, and the deferment rate usually seems to be 4.75%

SteeleyScott

eddddy said:

Having gone through a very painful statutory lease extension - rather than a freehold enfranchisement, my assessment is this:

Thanks Eddddy, I'll have a look through some of the tribunal's to try and ascertain some sort of average that I can work with to get a more accurate read.

Can I ask - why did you decide to go statuatory extension over enfranchisement?  was it a house or flat?  and if you did proceed at all with the enfranchisement, did you get to the point where you were given a figure to buy? i'm yet to speak to an actual person who's bought a freehold, their data would help too.

eddddy

SteeleyScott said:

Can I ask - why did you decide to go statuatory extension over enfranchisement?  was it a house or flat?  and if you did proceed at all with the enfranchisement, did you get to the point where you were given a figure to buy? i'm yet to speak to an actual person who's bought a freehold, their data would help too.

It was a flat (so different rules apply). The building was a mixture of residential and commercial, so collective enfranchisement wasn't a viable option.


Leaseholders often buy the freehold of their houses via informal negotiation.

The statutory route might incur professional fees of £3k to £5k - and might take many months.

So I suspect that leaseholders are prepared to pay a few thousand 'over the odds' to do it informally, to save fees and avoid the delay. And freeholders are happy to get a few thousand extra.

SteeleyScott

eddddy said:

So I suspect that leaseholders are prepared to pay a few thousand 'over the odds' to do it informally, to save fees and avoid the delay. And freeholders are happy to get a few thousand extra.

Yep, makes sense, for clarity though - Informally i.e i'm finding a way to contact the freeholder directly? I believe it was Barratt Homes on the original agreement. Though I guess it could've changed by now.

I pay the ground rent to a management firm called SIMARC, who have explicitly told me I need to do everything via them oppose to dealing with the freeholder directly, including getting a quote for the enfranchisement (including SIMARC's admin fee of £240, just for getting a quote!) Though the solicitor who's appointed to help sell this property said that is absolute nonsense.

When talking with my solicitor they did say that this (lease hold / lender issue) is a fairly common thing at the moment, and, in light of the problem this is causing for lenders, the freeholders are apparently being more often than not amicable to a deed of variation with a view to helping the sale.... see, to my ears that means they'll want loads of cash to 'help' me unlock the equity I have in that property....

So as it stands i'm sort of torn on whether I should be pursuing a deed of variation, or pursuing enfranchisement. Logically I presume the former will be the cheaper of the two. But the 2 avenues both have legal fees attached to them, so it's unlikely im going to want to do both.

hmmm.

eddddy

So Barratts (or whoever) is the freeholder, and SIMARC are their agents.

You can try contacting Barratts direct if you want - it would equivalent to bypassing an Estate Agent and contacting the seller direct.

Barratts might engage with you, or they might tell you to deal with their agents (SIMARC), or they might ignore you.


SIMARC have said how they'd like you to 'play the game'. But you're equally free to tell SIMARC and/or Barratts how you'd like them to 'play the game'.

For example, you can ignore the request for £240, and just write to Barratts and/or SIMARC with an offer for the freehold or the Deed of Variation. (But TBH, they're big companies, and your letter is likely to land on the desk of a junior employee, who'll probably just repeat the company line that you must follow SIMARC's processes.)


And bear in mind that it's possible that you pay £240 and somebody does a sensible valuation. But it's also possible that somebody will just 'pick a number' - and they pick a stupidly high one.

SteeleyScott

Yeah, dont really feel like paying SIMARC to be a middleman -

it's barely more expensive to proceed with my solicitor @ £300 for them to proceed and contact the freeholder regarding a variation on the deed. 

But they do charge the same fee to represent a client when dealing with enfranchisement, this is the dilemma I feel i'm going to be stuck in to be honest.

Unless I proceed with both I guess i'm just not going to know how much of a cost gap there will be between deed of variation and enfranchisement, thus I don't know which will represent the best bang for buck thereof.

eddddy

SteeleyScott said:

it's barely more expensive to proceed with my solicitor @ £300 for them to proceed and contact the freeholder regarding a variation on the deed. 

What is your solicitor going to do for that £300 fee? 

If they're just going to write to the freeholder asking if they'll agree to do a lease variation, you could do that yourself.


I guess a letter from a solicitor might have have slightly more gravitas - but the freeholder might still ignore the letter, or simply reply "no", or reply telling you to contact SIMARC. So your £300 would be wasted.

SteeleyScott

I'm awaiting their response to understand exactly what that service consists of. Though to be fair I have used them to buy and sell plenty times previous, I do rate them and they did sound quite confident, aware of the current climate and understood the problem it was causing. 

I'll update when I've got more of a reply from them come Monday morning. 

eddddy

SteeleyScott said:

I'm awaiting their response to understand exactly what that service consists of. Though to be fair I have used them to buy and sell plenty times previous, I do rate them and they did sound quite confident, aware of the current climate and understood the problem it was causing. 

If you end up doing a Statutory Enfranchisement, you really need a solicitor's firm with a specialist 'Landlord and Tenant' team/person.

It's unlikely that a conveyancing solicitor would have the specialist knowledge and experience.

(I know two different people who each used a conveyancing solicitors for statutory lease extensions. They both got 'outsmarted' by the freeholder's specialist solicitor. As a result, neither of them got their statutory lease extension.)


So in your position, I'd be tempted to get a specialist 'Landlord and Tenant' solicitor from the outset.

SteeleyScott

Do you know any that you'd recommend?

And remind me the advantage of going the statutory route oppose to the informal route?

For some reason in my head based on the discussion and resarch i'd done the statutory route seemed like it'd take much longer and often wasn't the preferred option?