Lease Extension in light of new lease laws

jacksr7

Hi,

I am going through the process of extending my lease on a flat that I rent. Its valuation is about £150k and there are just under 80 years remaining on the lease. I have been quoted £5500 to extend it back up to 125 years with the same T&Cs (rent is about £250 a year) I understand there are new laws about to come into effect. I have read some detail here on lease advice dot org site but there isnt enough information for me to make a decision.

I am wondering whether it would be cheaper for me to wait for these to come into effect, as I am in no rush to sell the flat at this point. Can anyone offer an opinion on this?

Thanks

Jonboy_1984

Many of the reforms were being discussed when i started my extension in 2016 and I had the same doubts. Every year you delay under the current rules will cost you more as the extra marriage value premium increases.

That premium seems expensive for an extra 45ish years compared to statutory route which would extend by 90 years and reduce ground rent to peppercorn (zero in real terms) for likely not much more .
Is there any escalation in the ground rent (e.g. a 20 year RPI review or similar)?
Have you had a surveyor of your own carry out a desktop survey (around £300) to get a ball park figure?

EssexHebridean

if you've let the term remaining dip below 80years it's only likely to get more expensive from here I suspect? 

jacksr7

I think the legislation states that marriage value will be removed at some point.

jacksr7

Oh and yes I had the survey done, he advised me it would be more like £15k to go down the peppercorn route. Rent increases by £50 every 5 years, so £10 a year.

user1977

There are no laws "about to come into effect". There's been a proposal that one day in the future there might be some new laws.

AskAsk

we have 88 years left on our lease and was looking to extend to sell the flat next year.  i approached the lease organisation and this is what they said

"The Government has committed to bringing in legislation by the end of this year to make it easier and cheaper to extend a lease. However, we don't know the details of that yet, other than the proposal to abolish marriage value. Marriage value is a premium payable when the lease falls below 80 years so will not affect you. It is also unlikely the changes will come in straight away as legislation has to go through Parliament before becoming law. It may be late 2024 before there is any change, if it happens at all."

the idea is the marriage value will be removed, but i don't know if there is going to be some sort of compensation to freeholders as there was something about a new formula to calculate the lease extension cost.  as yours is below 80 already, it may be worth doing the lease extension rather than wait for the reform.

JM68

We were advised to do the statutory route when we did ours and as you probably know it adds 90 years.  A lease of 170 years versus 125 years may not be that much difference in terms of future sale price for some, but as a buyer I personally would place more value on a place with a longer lease and no ground rent.

What could be more of an issue for you with the informal extension and keeping the current ground rent is that it sounds like after the next review it will be over £250 per year.  See the link below. 

https://www.ts-p.co.uk/news/the-gbp250-ground-rent-issue

Jonboy_1984

jacksr7 said:

Oh and yes I had the survey done, he advised me it would be more like £15k to go down the peppercorn route. Rent increases by £50 every 5 years, so £10 a year.

Was that £15k just the premium or an estimate with all fees involved?

Does your £5500 offer confirm the fees involved? You can typically expect the premium plus fees of around £3k on each side for most extensions.

Also make sure any mortgage company involved have approved any informal extension before you commit (your solicitor will able to confirm further what is needed).