Shanly homes lease extenstion query (are we being taken for a ride?)

chompie

Hi, my uncle died a couple of years ago and left his flat to my mother and aunt.
He had been living in the place (which was bought as a new build) for just under 20 years.
Now when trying to sell they were told the lease was under 70 years which is not something buyers would be interested in so a lease extension would be for the best.

So after giving shanly homes the property valuation they were given a price of (and paid) £25'000 for a lease extension which i believe is to 99 years (?) 
Then shortly after agreeing and paying this, Shanly homes informed them that they would be sending around their own valuers for the property.

And now subsequently, they have got back to them asking for another £1500

All seems a bit shady to me and makes me think that because they have not pushed back at all they are being taken advantage of.

I hope someone has some knowledge on this matter and can help.

I don't know the exact lease details as my aunt has dealt with it but i have asked her for specifics and will put them here as/when i get them.

chompie

Edit:
The lease at the start was 99 (extended to 189)
Does the £25k + £1500 price sound about right? (flat valued at £395k) 

eddddy

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

• 1. The Statutory route (or formal route)
• 2. The informal route

It sounds like you are following the informal route - which means there are no rules. The freeholder can ask for any price they want and any terms they want.

Similarly, you can make a counter offer with any terms you want.

£25k sounds expensive - but it depends on the ground rent payable (and whether it escalates), and the value of the property (as well as the length of lease remaining).

If you post those details here, it might be possible to give you an idea of what a statutory lease extension would cost - and therefore whether your freeholder's offer is good value.

Also, what are the lease extension terms that the freeholder is offering? (Extra years? Ground rent reduced to zero?)


A statutory lease extension would add 90 years to the lease, and reduce the ground rent to zero.
 

eddddy

chompie said:

Does the £25k + £1500 price sound about right? (flat valued at £395k) 

What is the ground rent, and does it escalate? That could have a very significant impact on the cost of a lease extension.

chompie said:

The lease at the start was 99 (extended to 189)

I'm not sure what you mean here. 

If the lease was originally for 99 years - 20 years ago - that suggests there are around 79 years left now. Is that correct?  (It's important to know if there are more or less than 80 years.)


Is the freeholder offering to add 90 years - making the total 169 years? Or something else?

And are they offering to reduce the ground rent to zero? 

chompie

eddddy said:

chompie said:

Does the £25k + £1500 price sound about right? (flat valued at £395k) 

What is the ground rent, and does it escalate? That could have a very significant impact on the cost of a lease extension.

chompie said:

The lease at the start was 99 (extended to 189)

I'm not sure what you mean here. 

If the lease was originally for 99 years - 20 years ago - that suggests there are around 79 years left now. Is that correct?  (It's important to know if there are more or less than 80 years.)


Is the freeholder offering to add 90 years - making the total 169 years? Or something else?

And are they offering to reduce the ground rent to zero? 

My understanding is that at the start is was 99 and had just dropped below 80 (although they were not there for 20 years so i don't know if the lease was actually 99 from date of purchase or just date of completion of build (From this statement it may become clear how little i know )
the payment is to extend the lease to 189 years, i have not heard (and do not know) anything about ground rent.

eddddy

Without knowing the ground rent, it's impossible to estimate a fair lease extension price.

The 99 years would have started from around the time the property was sold for the first time, not from the date your uncle bought it.


And to be honest, I think somebody might have misunderstood the lease extension period. It's fairly standard to extend a lease by 90 years, I've never come across a lease extension of 110 years.

Although there is nothing that prevents a lease being extended informally by 110 years.


Or maybe somebody meant it would be 189 years from 2005, as opposed to 169 years remaining from today.

When people (like buyers) ask about the lease length, they would mean remaining lease length (i.e. 169 years if the lease was extended by 90 years), not original lease length.


You really need to find out the ground rent details to move further forward.

chompie said:

All seems a bit shady to me and makes me think that because they have not pushed back at all they are being taken advantage of.

It's quite possible that they are being taken advantage of. It depends on exactly what has been said.

chompie said:

So after giving shanly homes the property valuation they were given a price of (and paid) £25'000 for a lease extension which i believe is to 99 years (?) 

It seems strange that they have paid £25k before an agreement on the price has been reached. Is a solicitor helping them with this.

chompie

eddddy said:

Without knowing the ground rent, it's impossible to estimate a fair lease extension price.

The 99 years would have started from around the time the property was sold for the first time, not from the date your uncle bought it.


And to be honest, I think somebody might have misunderstood the lease extension period. It's fairly standard to extend a lease by 90 years, I've never come across a lease extension of 110 years.

Although there is nothing that prevents a lease being extended informally by 110 years.


Or maybe somebody meant it would be 189 years from 2005, as opposed to 169 years remaining from today.

When people (like buyers) ask about the lease length, they would mean remaining lease length (i.e. 169 years if the lease was extended by 90 years), not original lease length.


You really need to find out the ground rent details to move further forward.

chompie said:

All seems a bit shady to me and makes me think that because they have not pushed back at all they are being taken advantage of.

It's quite possible that they are being taken advantage of. It depends on exactly what has been said.

chompie said:

So after giving shanly homes the property valuation they were given a price of (and paid) £25'000 for a lease extension which i believe is to 99 years (?) 

It seems strange that they have paid £25k before an agreement on the price has been reached. Is a solicitor helping them with this.

Sorry, although i have been apprised of some of the details, they seem quite uninformed.
I will try and get ground rent details.
All i was told is "it was extended to 189 years"
The price of the property was what the estate agent gave them which they then passed on to Shanly homes, who then sent out their own person to value it and made the subsequent charge.

The thing is a sale has been made and this is the only thing holding it up now. So maybe they (SH) know that and are asking for more in the expectation that they will just give them the money to push the sale through?

eddddy

OK, so now you mention that a sale is going through, I doubt you want to change plans at this late stage.

(A 79 year lease probably shouldn't worry a mortgage lender - so the buyer could have done a statutory lease extension after they bought - which might have worked out cheaper. But you probably want to stick with the informal lease extension now.)


So back to your original point...

chompie said:

And now subsequently, they have got back to them asking for another £1500

Negotiating the price of an informal lease extension is like negotiating the price of a house/flat - any offer will be 'subject to contract'.

So until contracts are signed and exchanged, either party can change their offer...

For example,

• the freeholder (SH) can change the asking price for the lease extension from £25k to, say, £26.5k or £50k or whatever. (Or they can refuse to sell the lease extension.)

• you can change the price you're offering for the lease extension from £25k to, say, £23k or £5k or whatever. (Or you can refuse to buy the lease extension.)

But for the lease extension to happen, both parties have to eventually agree on the price.

chompie

Turns out it is a statutory extension and the ground rent will be wiped out/zero upon extension.

ExEstateAgent

What exactly is the extra £1500 for? Maybe it's some admin charge or legal fee? If it's a statutory lease extension and a price was agreed I don't think they can just ask for more money because they feel like it. 

eddddy

The solicitor will have sent a completion statement saying what is owed, so it should explain what the £1500 is for.

The leaseholder has to pay the freeholder's valuation and legal fees, and the freeholder would send that bill right at the end of the process. So as a wild guess, the £1500 could be the freeholder's valuation and legal fees - but £1500 sounds cheap for that.


To be honest, it's difficult to make any definitive comments with such little information.