Lease extension

eddddy

youth_leader said:

@eddddy, my aunt rang me today, rather breathless, to tell me she'd  just 'caught' her neighbour and asked her to find her a surveyor. 

So are you saying that your aunt (the leaseholder) is asking the freeholder to find a surveyor for your aunt?

That has the potential to end badly. 

As far as a surveyor/valuer is concerned, the process is adversarial and works like this:

• The leaseholder instructs a surveyor/valuer who will value low - let's say £10k

• The freeholder instructs a surveyor/valuer who will value high - let's say £20k

• The surveyors/valuers then argue (negotiate) with each other and agree on £15k

So, in simple terms, the leaseholder's surveyor/valuer should be the leaseholder's 'friend' and the freeholder's 'enemy'. 

It's not really sensible for the leaseholder to ask the freeholder to pick that person.


Even worse, if the freeholder finds a valuer but then decides to instruct the valuer themselves, they'll come back with a super-high valuation.




Edit to add...

Also, this could end up with a huge conflict of interest, and so the surveyor/valuer refuses to act.

For example, if the freeholder talks on the phone with the surveyor/valuer about the lease extension process, the surveyor/valuer might say they cannot now act for the leaseholder - as they are the other party.

RHemmings

Good luck with this. 

eddddy

youth_leader said:

She's asked for the surveyor's valuation report figure my aunt obtained so she can discuss a 'reasonable' amount. We aren't going to be able to have a price 'up front' to stop my aunt worrying, I've told my aunt we are no longer 'informal'.

What does the valuation report say?

Often a valuation report for a leaseholder will say something like this (I'm using made up figures)...

If this lease extension were to be considered by a tribunal, we believe that their decision would be...

• In the best case £10,000
• In the worst case £20,000
• Most likely case £16,000

• Therefore we recommend that you initially use a figure of £9,000 on the s42 notice

And a valuation report for a freeholder might (or might not) have similar figures, but with a recommendation:

• Therefore we recommend that your initial counter offer is £22,000

EssexHebridean

OP - I feel for you on this - and I think you ought perhaps to consider whether your Aunt might be venturing into the territory of some form of dementia? A lot of what you are saying about the way she is - the confusion and the aggression - strikes a chord with me around the diagnosis my Great Aunt eventually got some years ago.  I can't recall whether you have said - but does she already have an LPA naming you or someone else in the family as her attorney(s) to be able to take over her finances when needed? 

There is always the option if her flat is going to need to be sold in any case that it may be worth finding out what sort of valuation it would get without the lease being extended, in order to just make the whole process more straightforward? Obviously it would be a lower sale figure but it's another avenue to explore. 

EssexHebridean

It's a tough situation OP, having dealt with similar, I feel for you. Of course if she loses trust in the neighbour then that will also cause problems with the LPA won't it. 

eddddy

youth_leader said:

At @edddy, can I please confirm that the freeholder should be instructing a surveyor to value the lease too? 

I've been on the web now for hours and cannot find any reference to it

I think I've already said I have offered to pay her costs.

She asked to see my aunt's surveyor's report yesterday, I thought about it later - not sure how she can decide on a reasonable 'cost' without a comparison.

Neither party has to get a valuation. But many people would recommend that you do.

Maybe we should take a big step back...

By serving a section 42 notice, the leaseholder is saying to the freeholder:

• "I'm taking you to court (tribunal) to get a lease extension." The court will decide how much the lease extension costs.

• The leaseholder might present arguments in court for why the cost should be, say, £13k. The freeholder might present arguments in court for why the cost should be £18k. The court will make the final decision.

• "But going to court will cost us each thousands of pounds in fees - so I'd like to settle out of court."

• "I'll start off by offering, say, £12k to settle with you out of court"

As part of that process, the leaseholder might or might not hire a valuer...

• To tell the leaseholder what lease extension cost a court might decide

• To act as an 'expert witness' to argue in court

The freeholder might or might not hire a valuer for the same reasons.

The leaseholder and freeholder might 

• use the feedback from their valuers to reach an out of court settlement

• or pick numbers out of the air to reach an out of court settlement

So for example, it's equally valid for a the freeholder to meet up over a cup of coffee and both say "Let's agree on £15k" - without involving any valuers.

youth_leader

Oh thank you for getting in touch so quickly. 

I hadn't realised that was what the Section 42 meant - I thought it was the same as the Tenant's notice.  My aunt would never manage to go to court, I'll speak to her now.  

I wrote to the freeholder just now to ask about her valuation,  and she wrote back saying she thought that the surveyor she had found to value my aunt's flat was working for her too?  I said she should have her own valuer.  I've messed up!

eddddy

youth_leader said:

Oh thank you for getting in touch so quickly. 

I hadn't realised that was what the Section 42 meant - I thought it was the same as the Tenant's notice.  My aunt would never manage to go to court, I'll speak to her now.  

Hardly anyone ever goes as far as court.

After serving a section 42 notice, I'd say that at least 99% of lease extensions are agreed before the case ever reaches court.

Going to court costs everyone thousands - it's really bad financially for everyone if things get that far.

Court is like a threat by the leaseholder - "If you don't agree a price with me, this will end up in court, and it will cost you thousands in fees. (And it will cost me thousands as well). So let's get a move on and reach an agreement."

youth_leader

Thank you very much @edddy, that is a relief. 

I am very grateful to you for helping me, I can't make head or tail of some of the websites I've been looking at. 

My aunt's freeholder has got back to me to say she has been in touch with a valuer who is on leave until Monday. She wants someone local to do a physical survey, so it will be more expensive.   I am paying for this valuation and do hope it helps her to come to a 'reasonable' amount for my aunt to pay.  If the lease had been 80 years plus without the 'marriage value' it would be so much easier. Onwards and upwards!

youth_leader

Just popping in to say thank you very much @eddddy, this awful part is over. A virtual pint sent to you! 

Helping my aunt sell her flat is next.  She has phoned the assisted living place and they have a long waiting list, I hope she gets there.

All of a sudden it is done.

My aunt's solicitor visited her today.  I didn't know but the freeholder's valuer was due tomorrow.

My aunt has £10K in savings, and told the solicitor she would like to offer the freeholder £9K for the lease extension premium.  She picked this figure out of the air.

The solicitor said the valuer tomorrow should be cancelled, and my aunt should ring the freeholder to offer her the £9K.  She did, and the freeholder accepted.

I have no idea why it has taken so long.  As I'd offered to pay the freeholder's costs I'm off to NS&I to transfer my savings, I hope it's working today, it keeps giving me the wrong secret questions.  

Thank you again, I am really grateful to you for all of your knowledge and kind advice.