Extending my lease

janecah

My flat is worth £300,000 and the lease is on 88 years - i have been quoted over £15000 from freeholders to extend lease to 99 years ! I have read that the government are considering rewriting rules on leasehold extensions - I’m not sure what to do… Help! I do not have £15000!

Jonboy_1984

Are they offering to extend back to 99 years or for an additional 99 years. What are they offering in terms of ground rent? Are they trying to "modernize" the lease or otherwise change the terms?

If you purchased over 2 years ago you are entitled to a statutory lease extension extension of an extra 90 years and ground rent reduced to peppercorn via a section 42 statutory process (assuming not extended already).

Either way you should visit the leasehold advisory service website for unbiased information. You should also find a RICS surveyor who specialized in lease extensions to survey your property and advise if the proposed premium is fair. If not they can negotiate on your behalf (for a fee).

If the informal route is used you will need your mortgage companies permission before agreeing.

The Government overhaul you mention is years in the making and no end date in sight.

It is common to fund such extensions by extra mortgage borrowing.

If you are planning to move in the next three years I would think carefully as to whether to bother or sell up quickly, it can be drawn out and frankly depressing process...

eddddy

janecah said:

My flat is worth £300,000 and the lease is on 88 years - i have been quoted over £15000 from freeholders to extend lease to 99 years ! I have read that the government are considering rewriting rules on leasehold extensions - I’m not sure what to do… Help! I do not have £15000!

So they're offering to extend the lease by 11 years.

What's the current ground rent, and what new ground rent terms are they proposing?

Unless you currently have a very high ground rent, which will be reduced to zero - it sounds like they might be trying to rip you off!

janecah

The ground rent is £200 per annum. They have not mentioned a revision to that. To have a brand new leases of 99 years they want £15,000! Or £25,000 for 125 years. I’m totally gobsmacked. We haven’t been in this property for 2 years until Mar 23 but they said they be happy to do it now. We have no mortgage 

eddddy

Take a look at some online lease extension calculators - there are quite a few. For example: https://www.lease-advice.org/calculator/

Based on your figures, that calculator suggests a statutory lease extension should cost £6k to £8k.

A statutory lease extension adds 90 years to the lease (so 178 years in total) and reduces the ground rent to zero.


So it sounds like your freeholder is taking the mickey!

(There would be legal and professional fees to pay on top - which might amount to £3k to £5k)

SallyDucati

Try this estimator from the leasehold advisory service, I think that figure of £15k is them trying it on!  Are the freeholder a company or an individual?

Lease extension calculator - The Leasehold Advisory Service (lease-advice.org)

janecah

The freeholder is a company which it appears built quite a few apartment blocks in the 80’s. 

Thank you so much for advice… I’m not so worried now… although will probably have to borrow from bank to fund some of this. 

blinko

janecah said:

The freeholder is a company which it appears built quite a few apartment blocks in the 80’s. 

Thank you so much for advice… I’m not so worried now… although will probably have to borrow from bank to fund some of this. 

i would release some equity if you can, as you mentioned no mortgage. This would potentially be the cheapest loan you could get .

It does sound like they trying to rip you off, but don't forget these people aren't your friend, they rely on people being stupid and not informed. keep us posted and we can help you

you still have time, 

jrawle

Deleted_User said:

The only route worth considering for a lease extension is the formal route. What this does is give you an additional 90 years on top of what you already have, but crucially it also makes the ground rent zero permanently. This is the all important bit, because rising ground rents make many flats unmortgageable and therefore impossible to sell on.

That is not strictly true. There is no reason you can't negotiate exactly the same terms if you go down the informal route (90 years added and no ground rent). I did this when extending the lease on my flat around 10 years ago. In fact, the informal route is better, all else being equal, as the freeholder has no right to insert a clause into the lease allowing them to buy the property at the end of the original lease term in order to redevelop the site; with the statutory route, such a clause is standard (or at least that was the case 10 years ago, as advised by my solicitor at the time).

What I do agree with is that the OP should not consider any other length/terms of lease extension. The offered 11 year extension is poor and a rip-off. OP: go back and negotiate a better price and terms based on the calculators linked above. The price the freeholder quoted is just a starting point. If they won't reduce it enough, find a RICS surveyor to work on your behalf.

bouicca21

10 years ago the previous owners of my flat paid £20k to extend a 47 year lease by 99 years on an informal lease extension.  Ground rent subject to increase clauses but capped at £1000 (London).  

After the extension the flat was worth a tad more than OP’s.  So I agree the offer is a rip off.  Either go the statutory route or get a valuation and negotiate.

eddddy

Deleted_User said:

With all due respect, the law has changed over the past year so you can’t advise from the same position you experienced 10 years ago.

When and how did the law change?

The clause @jrawle is referring to is still showing in section 61 of the Leasehold Reform, Housing and Urban Development Act 1993 on the legislation.gov.uk website - and the website says it's up to date as of 31st Oct 2022.

See: https://www.legislation.gov.uk/ukpga/1993/28/section/61


More generally, there's nothing wrong with going with an Informal Lease Extension if the terms are ok - for example, if the terms are as good as (or better than) a Statutory Lease Extension.

The professional fees are likely to be lower for an Informal Lease Extension. And and you might be able to negotiate more flexible terms - like a lease extension on completion, if you're selling.


Obviously, if a leaseholder can't agree acceptable terms with their freeholder they won't want to go ahead. So they can fall back on a Statutory Lease Extension instead.


(As lots of people have said, the opening offer made to @janecah sounds awful. So @janecah needs to do some major negotiating to get acceptable terms - or @janecah could decide not to bother negotiating and go down the Statutory route instead.)