Ground rent above 250 gbp

proofoffunds

Hello.
I am about to buy an apartment with ground rent 300 gbp. The rent is fixed. 
The sellers will pay for insurance, so the lender is ok with the fact is more than 250.

The lease left is 125 years.

The question is - should I try to extend the lease after 2 years in order to reduce/remove the rent and to make the property more sellable? I plan to live there at least 5 years.

I understand that as soon I extend as small the premium would be. I think lease if 200+ years and rent below 250 will make the property more interesting for buyers. How much hassle it is?

Thank you.

eddddy

proofoffunds said:

How much hassle it is?

Currently, a Statutory Lease Extension would typically work like this:

• You find a specialist solicitor and a specialist leasehold extension valuer

• You instruct them to get on with the process

• You sign the forms they ask you to sign

• You pay the money

• You get a lease extension

The process might take between 6 months and 18 months. You'll have to pay fees on top of the cost of a lease extension - maybe £4k to £5k.

The government are talking about reforming the process to make it faster, and to make the fees cheaper. That might, or might not, happen during the next two years.

snowqueen555

proofoffunds said:

Hello.
I am about to buy an apartment with ground rent 300 gbp. The rent is fixed. 
The sellers will pay for insurance, so the lender is ok with the fact is more than 250.

The lease left is 125 years.

The question is - should I try to extend the lease after 2 years in order to reduce/remove the rent and to make the property more sellable? I plan to live there at least 5 years.

I understand that as soon I extend as small the premium would be. I think lease if 200+ years and rent below 250 will make the property more interesting for buyers. How much hassle it is?

Thank you.

125 years is plenty of time, would extending the lease increase it's value?

I'd be more concerned with how the ground rent increases.

proofoffunds

snowqueen555 said:

proofoffunds said:

Hello.
I am about to buy an apartment with ground rent 300 gbp. The rent is fixed. 
The sellers will pay for insurance, so the lender is ok with the fact is more than 250.

The lease left is 125 years.

The question is - should I try to extend the lease after 2 years in order to reduce/remove the rent and to make the property more sellable? I plan to live there at least 5 years.

I understand that as soon I extend as small the premium would be. I think lease if 200+ years and rent below 250 will make the property more interesting for buyers. How much hassle it is?

Thank you.

125 years is plenty of time, would extending the lease increase it's value?

I'd be more concerned with how the ground rent increases.

Hello. The ground rent is fixed. Doesn't increase with time. The law of 250+ makes me nervous, and I am sure my potential sellers one day will have similar concerns. If they change the law in 4-5 years the extension will be bit pointless. 

I know 125 is a lot, but the additional positive aspects of increasing it will be that if I stay day for longer - let's say 15 years it won't drop to bit uncomfortable levels for re-sell and I won't pay 2400K during this period. Of course if they change the law sooner I won't pay this amount anyway. 

proofoffunds

eddddy said:

proofoffunds said:

How much hassle it is?

Currently, a Statutory Lease Extension would typically work like this:

• You find a specialist solicitor and a specialist leasehold extension valuer

• You instruct them to get on with the process

• You sign the forms they ask you to sign

• You pay the money

• You get a lease extension

The process might take between 6 months and 18 months. You'll have to pay fees on top of the cost of a lease extension - maybe £4k to £5k.

The government are talking about reforming the process to make it faster, and to make the fees cheaper. That might, or might not, happen during the next two years.

If you are talking about the same reform that should make the ground rent for existing lease 0 GBP, it will be great if happens in the next 4-5 years, but nobody can be sure what will happen. They are changing their mind about much more important things on a weekly basis  

eddddy

proofoffunds said:

If you are talking about the same reform that should make the ground rent for existing lease 0 GBP, it will be great if happens in the next 4-5 years, but nobody can be sure what will happen. They are changing their mind about much more important things on a weekly basis  

I don't think any reform has been discussed that would simply reduce ground rent to £0 for existing leases.

(That would be grossly unfair on the pension funds, investment funds and private investors who have invested in freehold ground rents.)

The reforms being discussed are to simplify the lease extension process, so that you no longer need to pay for expensive solicitors and valuers. So you might save £5k in solicitors and valuers fees.

 

proofoffunds

eddddy said:

proofoffunds said:

If you are talking about the same reform that should make the ground rent for existing lease 0 GBP, it will be great if happens in the next 4-5 years, but nobody can be sure what will happen. They are changing their mind about much more important things on a weekly basis  

I don't think any reform has been discussed that would simply reduce ground rent to £0 for existing leases.

(That would be grossly unfair on the pension funds, investment funds and private investors who have invested in freehold ground rents.)

The reforms being discussed are to simplify the lease extension process, so that you no longer need to pay for expensive solicitors and valuers. So you might save £5k in solicitors and valuers fees.

 

That would be good enough, as the extension usually reduces the rent dramatically. But the reform itself could change that. Even if they only remove the 250+ rule will be great. 

snowqueen555

The fact that ground rent won't increase is actually pretty good and wouldn't put me off buying a place I wanted.

I think it isn't worth extending the lease because it isn't adding any value to the property but you will be out of £ to do it.