Leasehold Extension Premium Costs

mangled

Hi All

I have a question regarding the process around setting the premiums for extending a leasehold. I am in a complex of around 300 flats and along with all of my neighbours we have 81 and a half years left on our lease. So I have gone into a process with five neighbours to extend our leasehold by a further 90 years. There are some shared ownership flats here but myself and all my neighbours have slightly different layouts but we are all in 2 beds and have 100% ownership.

The reason for my question is so far three of us including myself have had our estimated premiums to be paid according to our valuations been estimated ahead of time. And the range of one of my neighbours is around the £3500 and mine and the other person so far are estimated premiums around £5500.

Properties are around £200k  to £220k. Ground rent £75 per year. Am awaiting reply from Solicitors. And yes checked leasehold extension valued at £5000 to £6000 with these figures, but solicitors are aware we have all gone in together and yet have offered vastly different premiums estimated.

So has anyone any idea why this could be the case, unless it's an error.

But if the person who has been offered the cheaper quote accepted, would then this enable the rest of us to ask for the cheaper quote also as that's only fair

I am just wondering as the legalities of the offer and then why there could be such a difference in premiums if it is indeed accurate.

eddddy

Taking a step back - there are 2 ways of extending a lease:

• 1. The informal route - i.e. negotiating directly with the freeholder

• 2. The statutory route - which might end up at a tribunal

Which route are you taking, and who has given you the quote? (And who has given your neighbour a quote?)



If you're taking the informal route, there are no rules on premiums. The freeholder can ask for any price they want, and you can offer any price you want. If you can reach an agreement, you can proceed. (And for example, they can charge different leaseholders different prices for any reason they choose.)

If you're taking the Statutory route, you would typically ask a valuer how much a tribunal would set the premium at, and offer around that amount.

You mention that others have "shared ownership", so is your freeholder a housing association?

mangled

We are all using same solicitor and all in similar 2 bed flats and all have 100% ownership. 

There are several shared ownership properties but the six of us all have 100% ownership and yes the freeholder is a housing association. 

There would be no more variance between property valuations between £200k to £230k maximum sales prices. Our ground rent is all the same at £75 per annum and we all have 81.5 years left on our leasehold currently and looking all to extend by 90 years.

So three of us have received emails from the same employee from the same solicitor notifications of the valuation process.

One neighbour was quoted a £3k premium starting valuation. 

I was £4k premium starting premium valuation 

And other was £4.5k premium.

Three others not at this stage as yet.


How can this be right ??

Surely this is some kind of error or are we all missing something

eddddy

You need to explain more clearly.


You mention "estimated premium" and "starting premium". Why are you using the words "estimated" and "starting"?

Is your freeholder's solicitor actually offering you a lease extension for £5500?

Or, for example, are they telling you that you need to get a formal valuation - and they are warning you that the formal valuation might be around £5500?

What else does the letter say?

mangled

The starting figure for thr negotiations regards the premium to pay is £4100 with the estimated likely end result being that the premium will be £5500.

My neighbour in same position has a starting point of negotiation with the freeholder at £3000 with an estimated end result being premium to pay of £3500.

We both in 2 bed and have staircased up to 100% ownership

We have realised that he has put zero ground rent and i put £75  ground rent per annum in error.

Hence is the difference because of this oversight.

As said properties around £220k valuation if sold.

Also I personally initiated my s42 notice by paying a valuation fee to my solicitor but seems based on inaccurate information.

Seen as the valuation process is to be done by the housing association ie freeholder, will this be noticed and my error be taken into account

I have emailed the solicitor yesterday stating this error

Would you say this is simply a straightforward error to be updated ??

Ie will be brought into line with quotes received by my neighbour.

eddddy

So the situation is completely different. It now seems that....

• You are doing a statutory lease extension

• You have arranged a valuation by a valuer (but it sounds like you received the valuation via your solicitor)

• You gave the valuer incorrect information about your ground rent, as a result your valuation has come back too high

As an aside, I'm surprised that your valuer simply 'took your word' about the ground rent - I would have expected them to check your lease, to make sure.


If your solicitor has served the section 42 notice, your offer to buy a lease extension is binding. You cannot reduce your offer.

For example, if you have offered to pay £4100 in your section 42 notice, and your freeholder accepts your offer, you're stuck with it.  (You can withdraw, but that will leave you with costs to pay.)


Has your solicitor actually served a section 42 notice yet?


(TBH, I might even argue that the valuer was negligent, if they failed to check the ground rent in your lease.)

Tracet74

Have you had a valuation carried out by a surveyor for you?  This should give you the figure for your solicitor to put into the Section 42 Notice.  A solicitor does not usually calculate what would be offered to your freeholder.