Lease extension

eddddy

youth_leader said:

@edddy ... I've used a lease calculator and it says that the extension will cost £10-11K, excluding legal costs, to include the marriage value because it is only 74 years. 

Can I suggest to my aunt she offers her neighbour/freeholder less? £5K? 

There's nothing to stop her offering £5k.

If the freeholder accepts the offer, that's great. But if the freeholder asks a valuer, or checks an online calculator, obviously she'll find out that's low.

It might be best to try to get 'provisional agreement' with the freeholder on the amount, before serving the section 42 notice.

I gather that freeholder can reject a section 42 notice as invalid, if the premium offered is too low - but I've never found a definition of how low is "too low".


(But in your case, would the freeholder want to play hard-ball and reject the section 42 notice? Or would she just say "I think that's a bit low - it should be around £10k or £11k."?)

BarelySentientAI

youth_leader said:

Even after all my reading I hadn't really grasped the fact that the new Act would  a) allow you to extend your lease for 990 years for a flat (previously only houses) and b) the marriage value to the freeholder is abolished.  That would save my aunt about £5K at the moment - it mentions a third to half in the literature. 

But also c) might change the discount rate used which could (if it changes the 'wrong' way) make the extension price more expensive.

20122013

youth_leader said:

I received an email from Homehold after I'd posted.  They are very booked up, and cannot agree any start until w/c 7 October.  They also foresee difficulty due to my aunt's age  if my aunt dies during the process and we have to apply for probate. ..'

I hope you are doing ok?

I have only started looking into lease extension or not extend, this is my understanding of it so far and some of the options I can think of:

3 agents all told me to extend, as most buyers are unlikely to get a mortgage with lease under 90 years? By not extending it will be more difficult to sell.  In my mind, my buyers, will more likely be first time buyers, investors or landlords (cash buyers) there are lendes who will lend to short leases but the rate will be higher,  cash buyer will negotiate a lower price.  If the sold price is lower that means the stamp duty will also be lower!! and if they want the lease to be extended  I can see whether the buyer wants me to start the lease extension and upon completion transfer it over to them to complete,  and if the Freeholder agrees. (As you need to own the propery for at least 2 years before you can apply for a lease,) I ask the agents do you have cash buyers that you have approved! and buyers who do not mind lease below 90 years

Today, I spoke with one of the agent who had sold some properties on my estate and told me one of the seller's solicitor was 'incompetent' and added 4 months to the process and no progress.  Paid £15000 for the lease extension and managed to get £7000 extra because of the extension and took about 8 months.  Another agent

said to extend the lease will cost £5000 all in (I could not work out why the big difference in fees but

after reading this : https://www.moneysavingexpert.com/mortgages/extend-your-lease/

or me the key is to find a professional who is used to negotiating and lease extension will keep costs low)

The other option is to sell via AUCTION and /  'speak to' a few more estate agents (I let them speak so they can show off their knowledge) I give them my scenario and let them come back with a solution.

I hope it will be a little more straight forward for your aunt as she knows the freeholder.

RHemmings

youth_leader said:

Hello, how many years do you have on your lease - the danger point, as per Martin's article on lease extension, is 80 years.  Do you have 90?  If you do have 90 it could well be worth waiting, if you are able, for the Act to become law late 2025.  You could then extend the lease on your flat to 990 years. 

The Homehold organisation, who offer the services of a valuer and solicitor to extend your lease at the fixed cost of £2.4K plus VAT, do point out the advantages of waiting for the Act to become law.  My aunt is too old and lonely and wants to be amongst people, she cannot wait.

I am not a fan of auctions.  I sold my house at auction and it was an eye wateringly expensive horrible experience.  Young inexperienced staff showing six plus viewers around the house - allowing them to wander freely I imagine, traipsing mud everywhere.  Buyer messed about 'passing it in front of his underwriters' - he had a mortgage with Nat West.  Then he wanted eight weeks to completion, I had to order more oil, and he refused to pay the price for it.  Avoid if you can. 

It's possible that when the new act comes into force that extension of leases more than 80 years could become more expensive. As the discount rate used may change. Possible, not definite. 

Skiddaw1

Hope it all gets sorted out without too much hassle @youth_leader . Also wanted to say hurrah re your daughter and her partner! Very glad they've had their offer accepted.

Skiddaw1

LOL! I should flaming well think so @youth_leader

A lovely city. I'm very fond of Belfast. I'm sure they'll have a wonderful time with the city on their doorstep (with the added benefit of all the fab countryside & coastline around and about).

NameUnavailable

@youth_leader this seems a bit difficult for you dealing with an elderly relative and a freeholder who doesn't understand their obligations by the sound of it.

Perhaps you could send her an email/letter outlining the options (may as well be up front about it).

If you go for an informal lease extension the freeholder can agree whatever terms they like and then it's just a case of instructing solicitors to do the necessary paperwork. As the purpose for this extension is to enable a sale you could suggest a short extension, say to give a total period of 99 years and a small fee plus costs (say £2K and all costs). This is being on the assumption that the freeholder is willing to 'help' and not looking for maximum profit out of this situation. Whoever buys the flat will probably need/want to extend again in 9 years or so so they will get another windfall then.

If that's not an option then you may as well go down the formal route - there will be a valuation to pay for and maybe some negotiation over the eventual price but it will add 90 years and any ground rent will be reduced to peppercorn (what is the current ground rent). I think maybe the cost might be more than that £10K savings though with all the fees.

If you go informal just be careful that they don't try to slip in a ground rent increase or change that could leave you with a new problem in trying to sell!

A final option is to put the flat on the market - either at a low price to take into account the 'short' lease which might attract cash or investor buyers, or, I know you said you have had a bad experience at auction but ultimately that might be the best option given everything you've said - quickest sale and no chance of the buyer pulling out during the typically 3-6 month conveyancing period for flats. You can dictate the terms, i.e. 2 or 4 week completion period, contribution by the buyer to the fees (i.e. buyer pays £X towards sellers costs) etc. It's worth considering to get your Aunt moved asap, which seems to be more important than selling for the very best price possible.

NameUnavailable

Doesn't sound like the 'friendly neighbour' is going to do you any favours and wants to go the formal route too.

You can find a solicitor who specialises in these transactions and get them to deal with it all, or given what you've said previously it may just be better for your aunt to sell the flat as it is for a suitably lower price and she can lodge a Section 42 notice so that the new buyer can extend the lease without having to wait the usual 2 years.

With the leasehold reforms coming in soon a potential buyer might be getting a great deal that way, and your aunt can move on quickly.

eddddy

youth_leader said:

The paralegal went to see my aunt two weeks ago, when she left she said she would show her notes to the solicitor experienced in dealing with conveyancing. 

Lease extensions are a specialist area - they're not conveyancing.

I've come across a number of lease extensions that have been messed up by conveyancing solicitors, because they're not experienced in them.


In these circumstances, if the lease extension is important to you, I think a lease extension solicitor would probably suggest the following...

• Serve a section 42 notice on the freeholder to start the Statutory Lease Extension process

• Try to continue with informal negotiations with the freeholder - to see if you can reach agreement

• If the informal negotiations are getting nowhere - you proceed with the statutory process

But there are pitfalls and traps with this approach - for example, missing deadlines and failing to formalise agreements - so you need a specialist solicitor to make sure you don't get caught out.


BUT... whilst this approach should just about guarantee that you get the lease extension (if it's done right), your legal/valuation fees will probably be much higher. Maybe as much as £4k (in addition to the cost of the lease extension).

youth_leader

Oh thank you so much @eddddy, I do appreciate it.  I live alone and don't have anyone to discuss it with.  I do feel for my aunt, it has completely confused her.

She said today that she doesn't expect me to 'bankroll her' - but my Mum would have helped her, I do feel I should.  

I know she has a certain amount of savings to pay for the extension, but I will help her with the solicitor's costs, as well as paying her freeholder's solicitors costs.  Hopefully I can recoup them when she sells.  

I feel a bit confused about it myself and have just checked.  In the 'property' section on her solicitor's website detailing the areas they cover, it  does state  "Extending an existing lease or buying a freehold."