Cost of extending lease when you own share of freehold

Emski75

Dear All,

We live in an upstairs flat and share the freehold with the flat downstairs.

Our lease length is 68 years whilst downstairs is 82 years. In readiness to sell our flat, we were advised to extend the lease to 999 years.

Our initial understanding was that this would cost about £500, which was simply to cover the legal ramifications of the extension.

We had spoken to our neighbours downstairs about extending the lease and when we asked them to sign the papers our solicitor had prepared, they referred the matter to their solicitor. Their solicitor came back and advised them to get the lease valued. We received a note from them today advising us that the valuation would cost £600 and would we contribute to half of this.

We are not really sure why the valuation is needed and are now worried that, as a result of the valuation, we could incur substantial further costs due to the difference in lease lengths.

We have emailed our solicitor for her advice but we won’t hear back from her until Tuesday at the earliest. This has been worrying me all afternoon and I wondered whether anyone could shed any light on the matter for me.

Thank you in advance.

Emski

Doozergirl

EDIT: £600 is a lot for a valuation actually. I think we paid £199 for our freeholders valuation and £75 for our own desktop valuation (which I think is adequate actually)

Do your neighbours realise that if they play this way that you can advise your buyers that when your neighbours need to extend their lease that they can also charge the other for the lease extension?

The solicitor isn't necessarily *wrong* to advise them this way but I don't think they're in such safe territory at 82 years to be trying to charge you for a lease extension. Theoretically (at least) you could keep your half of the freehold and sell the flat on it's lease and wait for them to extend and charge them accordingly also.

If they want to play this way, then you need to make it clear that the same card can be played on them. Perhaps they should also consider extending their lease at this point. 82 years, it would cetainly be sensible.

martinman3

It is not 100% clear from your post but are you extending both leases ?

That is what you should be doing, unless you are changing something in them apart from the length I don't understand why there should be much expense at all.

Emski75

Our understanding is that they will also extend their lease.

That is why we are so confused about the need to get the lease valued.

Can anyone advise us why they would want to get the lease valued?

Doozergirl

The solicitor is suggesting that your lease extension is more valuble than theirs because they are of differing lengths. A lease extension at 82 years will cost a lot less than one at 68 years. Their solicitor is suggesting that they can profit from the deal.

Sorry, I didn't make that clear. If you search through Richard Webster's recent posts, he explains it very well.

My only advise would be to refuse to pay half towards the valuation pleading ignorance and saying you don't understand how it will help when you can simply pay the legal fees and get it over with. It will do you no good at all to pay for that valuation. Your fellow leaseholder will hopefully decide that the outlay isn't worth it.

Emski75

Thanks for that Doozergirl.

That's what we were worried about, that they would want us to pay them some money to cover the difference.

Does anyone know what we could end up paying our neighbours due to the differing lease lengths? Would it run into hundreds or even thousands?

Doozergirl

Emski75 wrote: »

Does anyone know what we could end up paying our neighbours due to the differing lease lengths? Would it run into hundreds or even thousands?

The difference in price of lease extensions on an identical or near identical property at 82 and 68 years will amost certainly be £000's

http://www.tenancy-agreements.co.uk/lease.php

Gives you an idea of the cost of a lease extension. The yield should be 4.75% and the marriage value 50%. You can halve the cost because you own half the freehold.

The value of your flat will be affected by having a lease of 68 years. Their's remains fairly unaffected hence the difference in cost.

Richard_Webster

The solicitor is suggesting that your lease extension is more valuble than theirs because they are of differing lengths. A lease extension at 82 years will cost a lot less than one at 68 years. Their solicitor is suggesting that they can profit from the deal.

Sorry, I didn't make that clear. If you search through Richard Webster's recent posts, he explains it very well.

My only advise would be to refuse to pay half towards the valuation pleading ignorance and saying you don't understand how it will help when you can simply pay the legal fees and get it over with. It will do you no good at all to pay for that valuation. Your fellow leaseholder will hopefully decide that the outlay isn't worth it.

That's the point, I'm afraid. They can charge for it - although they will only get half, but you or your buyer could be awkward in the future when the buyer has a 999 year lease and they only have 70s... They only need advice on valuation if they want to profit from the difference in lease lengths. The moral issue is whether they paid a premium price for their flat because they would get to profit from a lease extension on the other flat in the future. I bet they didn't, so why should they profit now? See what they say when you ask them that question...

So offer to do the two together but for no more than the legal costs.

Emski75

Thank you everyone for your responses.

I must admit I feel sick to think our neighbours are trying to profit quite considerably through this.

We can't afford to pay such a sum to extend our lease.

Does anyone know what would happen if we do not extend the lease? We are hoping to put our flat back on the market next year - would our lease length cause problems for a buyer/mortgage company?

devils_advocate

In the worst possible scenario for you, if you couldn't afford to pay for the lease extension, you could sell your flat for what you could get. If you then kept the share of the freehold, you could object to the neighbours extending their lease, without paying you a significant sum., and then they would be a loser.

So suggest to them that the differences in lease dates are irrelevant, as the worth of your negative control is actually more than the worth of the freehold to either of you. Neither of you can gain value separately, but you can do it jointly. However, you can both destroy value separately.

Richard_Webster

You might be able to sell a 68 year lease because despite the scenario that has occurred in this thread, there a fair number of people out there who either think:

a). that it automatically follows that if you have shared freehold you get a lease extension or
b). that you don't need one!

Seriously though, I would talk to the sellers and ask why they want to profit from the situation. If I were advising them I would have to tell them that in theory they could do so, but I would also warn that it would be seen as a negative step in neighbourly relationships that could backfire on them...