Benefit to waiting for lease extension reforms before extending?

NervyBuyer

Hi, I was intending to start the lease extension process on a maisonette (I know the procedure and the expected cost as my neighbour in an identical situation has recently done theirs) but a solicitor advised me it might be worth waiting for the extension reforms to come into effect.

From what I have read, it's unclear when this might be, and the only benefit I can see would be an extension of 990 rather than 90 years (my ground rent is £10 a year already so that's not really a factor). Considering that another 90 years is way more than long enough for my purposes I'm not sure it's worth waiting. There are 92 years left on the lease at the moment so it's not super-urgent as I have no plan to sell in the near future (aware of the 80-year issue), so it seems I would be risking the cost of the extension going up as the time left decreases for the benefit of another 900 years on the lease.

Am I missing anything?

Thanks!

eddddy

It sounds like you're talking about a statutory lease extension - as opposed to an informal lease extension.

In that case, as things stand, you might have to pay £2k to £3k in legal and professional fees.

The reforms are talking about reducing those fees dramatically.  The discussions are about making it an automated online process. If that really does happen, I'd guess the fees might drop to a few hundred.  So you might make make a saving there. But it's also possible that the plans change.


Under the current system, the cost of extending a 90 year lease isn't much different from the cost of extending a 92 year lease. 

Take a look at an online lease extension calculator, and change the lease end date to simulate 90 and 92 year leases: https://www.lease-advice.org/calculator/


TBH, I wouldn't be surprised if the cost of a lease extension to 990 years under the reformed system, costs a bit more that adding 90 years under the current system.

NervyBuyer

Yes, I did that 90 vs 91 vs 92 calculation (forgot to mention that) and it seemed there wouldn't be much difference so I've got a bit of time to wait and see I suppose. 

It is a statutory extension and yes that's the sort of fees figure I'm looking at.

Feels as if there are too many unknowns and it might just be better to get on with it.

eddddy

You say your neighbour has done it recently.... was it a statutory extension? With the same landlord/freeholder? Would you be happy with the price they paid?

If so, you can make an informal offer to the freeholder... i.e. You'll pay the same as the neighbour, for the same terms (+90 years, zero ground rent).

That might save you £1k to £2k in fees. Or you can even say you'll split the saving with the freeholder and pay them an extra £500 to £1k for the extension.


Having said that - you mention it's a maisonette... Is that an upstairs maisonette and a downstairs maisonette? Is it better to jointly buy the freehold with your neighbour - and then extend both your leases to 999 years. And then there might be loft conversion potential for the upstairs maisonette as well.

NervyBuyer

Yes same freeholder, just 2 of us in the house conversion. Freeholder is local authority, they are very 'computer says no' on process and wish to follow the statutory route, which given how it went (smoothly) for my neighbour I was not inclined to have the hassle of arguing with.

Neighbour did not want to buy the freehold because of the overheads of running it between us, sorting out insurance etc (they were initially keen but were put off by their solicitor who also said it would not noticeably increase the value). I am not particularly bothered either way (although would have gone for freehold if they'd wanted) because I also share that sentiment, and with both being rented out we are not even on the spot to sort things between us. As there is nothing communal apart from the unavoidable walls and roof, our service charges are minimal and there is not really any scope for the freeholder to take the mick with repairs etc (in 22 years there has been no problem apart from the odd slow but minor repair) so disrupting the status quo isn't compelling.

eddddy

NervyBuyer said:

Neighbour did not want to buy the freehold because of the overheads of running it between us, sorting out insurance etc (they were initially keen but were put off by their solicitor who also said it would not noticeably increase the value). 

I am not particularly bothered either way...

Yep - although, as I mentioned, if there's some development potential, that might be a reason to buy the freehold.

For example, if the upstairs maisonette owner wants to convert the roof space to create additional rooms, or the downstairs maisonette owner wants to build an extension / conservatory - or there's scope to create parking spaces, etc.


But it all depends on the details of the lease, etc.

If there is development potential for whichever flat you own, you could even do a deal where both flat owners apply to buy the freehold, on the understanding that you pay 100% of the cost and become 100% owner of the freehold. Then you might be able to develop without needing to discuss/agree with your neighbour. 

(But you'd then be responsible for insuring etc, and collecting costs from your neighbour.)

NervyBuyer

I didn't realise that sort of arrangement was possible. That might be worth looking at. I am upstairs. There is a large loft (I wouldn't want to convert but I suppose a potential buyer in the future might). Downstairs does have scope to extend into their garden. Only mine has scope for parking spaces (which has so far been unnecessary because of ample free street parking with everyone else on the street having a large driveway).