Lease extension negotiations and alterations to lease

NervyBuyer

I have started the lease extension process on a flat/maisonnette (formal route) and have a solicitor and a valuation.

I will of course be asking these things of the solicitor but in an effort to avoid unnecessary phone/email charges and to get the lie of the land beforehand I'm hoping someone with some experience of the process can offer a bit of advice on 2 things:

1. I have been advised to offer £2.9k for the premium and to expect the freeholder to counter with £6k (my surveyor's valuation being £4k which tallies with the calculator on lease-advice). How do the negotiations work - is it handled by the solicitors for each side? There's no ground rent and there are 89 years left on the existing lease.
2. Can I ask for either of these variations to be made to the lease at the same time? a) Correcting a mistake - the wrong house number is stated in a clause giving a neighbouring property right of access over a path that belongs to the property covered by my lease. b) Amending the clause which prohibits all access to the loft to allow access for maintenance/requirements such as EPC, and ideally use for storage (I'm aware this last point may incur additional expense if it is even admissible). 

The flat is the top half of a house that was split in 2 (both are entirely self-contained with their own front doors) and the loft has no shared access or utilities. I currently have unofficial permission (in an email) to allow access for an EPC.

Freeholder is the city council and the other owner in the building extended their lease recently without any issues, although I don't know what their costs were like. 

eddddy

NervyBuyer said:

1. I have been advised to offer £2.9k for the premium and to expect the freeholder to counter with £6k (my surveyor's valuation being £4k which tallies with the calculator on lease-advice). How do the negotiations work - is it handled by the solicitors for each side? There's no ground rent and there are 89 years left on the existing lease.

There's no reason for the solicitors to get involved in the negotiation. There's different ways to handle it...

For example.

• You can say to the freeholder "Let's just cut out all this nonsense - I'll offer you £3,500...  Ok then I'll offer you £4,000"

• Or you can leave the valuers to have a technical argument - for example, your valuer says "Because of the local market conditions and the type of property I think a tribunal would say the deferment rate is 6%"  and the other valuer replies "I disagree, I think a tribunal would say the deferment rate is 5%".

You will have to pay both valuers' fees while they argue/negotiate - so it might work out cheaper to agree to a slightly higher price, rather than pay hundreds (or thousands) in fees to the valuers.



If you and the freeholder can't agree on a price, it will have to go to a tribunal to decide.  That will probably cost each party up to £2,000 each. (So it would be daft to do that in this case.)

So it might turn into a game of 'chicken' - for example, the freeholder says "If you don't pay me £4,500 - I'll go to tribunal and that will cost you £2,000"

eddddy

NervyBuyer said:

1. Can I ask for either of these variations to be made to the lease at the same time? a) Correcting a mistake - the wrong house number is stated in a clause giving a neighbouring property right of access over a path that belongs to the property covered by my lease. b) Amending the clause which prohibits all access to the loft to allow access for maintenance/requirements such as EPC, and ideally use for storage (I'm aware this last point may incur additional expense if it is even admissible). 

I guess you can ask - but the freeholder is under no obligation to grant any other lease variations.

You will need your mortgage lender's consent for any lease variations.

(But you might have the right to go into the loft for property maintenance anyway, under the Access to Neighbouring Land Act 1992. But I'm no expert on that.)

A lease variation for a statutory lease extension is a special case. A mortgage lender does not need to be consulted about that.

NervyBuyer

Thanks - I don't have a mortgage.

When you say 'There's no reason for the solicitors to get involved in the negotiation.' do you mean they don't need to get involved in the numbers, they just pass on my instructions (rather than the leaseholder actually talks directly to the freeholder)?

eddddy

NervyBuyer said:

Thanks - I don't have a mortgage.

When you say 'There's no reason for the solicitors to get involved in the negotiation.' do you mean they don't need to get involved in the numbers, they just pass on my instructions (rather than the leaseholder actually talks directly to the freeholder)?

The easiest way is for the leaseholder to email the freeholder (or maybe phone them, or write a letter to them) with an offer. It's like making an offer to buy a flat.

I suspect the solicitors won't want to (and/or won't agree to) act as a kind of "post office" forwarding offers backwards and forwards between the leaseholder and freeholder.

It's best to include the phrase "Without prejudice and subject to contract" in any emails or letters. That confirms that you are not committed to anything you write.

If you manage to agree an offer, you should then tell your solicitor what it is.

Then the solicitor can put it in a contract - and it becomes binding once both parties sign.




(Some valuers might argue that you should do all negotiations/offers through them - because they are "professionals".  But they will probably charge you more fees if they're involved.)

NervyBuyer

Thanks - I assumed communications would be through the solicitor because in other property transactions you never talk to the other party directly, there's always a middle-man (estate agent or solicitor).

I'm not intending to get into protracted negotiations and certainly not to go to a tribunal, but I'm certain there will need to be one counter-counter offer made.

eddddy

It depends a lot on the freeholder's mindset. If they are 'nice' they'll probably happily talk to you.

If they're 'nasty' or they're trying to intimidate you into paying more money, then...

... the freeholder might say something like "all negotiation must be via my valuer" (because their valuer's fees will eventually be paid by you, so the freeholder might not care about cost).

And the valuer might say "I won't talk to you I'll only talk to your valuer". So you'll have to fight back.



Unfortunately, negotiating a lease extension is often an adversarial process. A bit like negotiating a divorce.

Both parties want the best deal possible, and some people will be prepared to resort to dirty tricks to get it. But others will be fair and honest.