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Need Help Negotiating Lease Extension.

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strawberries1
strawberries1 Posts: 873 Forumite
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in House buying, renting & selling
I paid £760 to get a survey done in October after buying with a S.42 in July at £260,000. (£350 + vat for neg)

The freeholder proposed £18,867 (counter notice) as opposed to my £12,000 (S.42). After I presented him my surveyors calculations he's reduced it to £16,000.

I've asked how much it will be if he retained some ground rent and he's offered £15,700 for retaining £30 GR.

He says he'll reduce the premium by £1000- for every £100 in GR ie £15,000 for £100gr increasing by £100 every 25yrs.

£14000 if £200 increasing by £100 every 25yrs

£13,000 if £300 increasing by £100 every 25yrs.

72.93 yrs remaining, bought at £260,000 in July 2018 £30 GR.

In 2013 a similar flat with 78yrs left paid £6000 to extend with GR at £250 doubling every 25yrs.

The surveyor says they're respond with the same points that made to me re relativity etc so he can't guarantee he'll get a further reduction if he negotiated with them.

I was hoping for a much lower premium.

I'm happy to receive your knowledgeable advice and suggestions.

Thanks.
«13

Comments

  • anselld
    anselld Posts: 8,281 Forumite
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    If your surveyor can support the £12,000 calculation and the Freeholder won't budge then apply to the First Tier Tribunal for a determination.
  • da_rule
    da_rule Posts: 3,618 Forumite
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    When was the section 42 notice served?
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    edited 20 December 2018 at 2:47AM
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    [FONT=Verdana, sans-serif]Your surveyors £12,000 seems spot on and that should be what you pay approx so you can:[/FONT]
    [FONT=Verdana, sans-serif]1 - Pay your surveyor to negotiate, how much extra will he charge for that?[/FONT]
    [FONT=Verdana, sans-serif]2 - If that does not work, apply to the First Tier Tribunal for a determination. How much extra will your surveyor charge for that? But b[/FONT][FONT=Verdana, sans-serif]efore you decide read this:[/FONT]

    [FONT=Verdana, sans-serif]https://www.leaseholdknowledge.com/lease-extension [/FONT]

    [FONT=Verdana, sans-serif]Particularly this bit:[/FONT]
    [FONT=Verdana, sans-serif]'Trick 1: The freeholder’s counter offer will be huge![/FONT]
    [FONT=Verdana, sans-serif]Why is it unfair?[/FONT]
    [FONT=Verdana, sans-serif]You must legally make an opening offer for the cost of your lease extension and your offer has to be ‘reasonable’. Freeholders do not have the same limitations when making their counter offer, it can be as big as they like! It is often a disproportionately large amount.[/FONT]
    [FONT=Verdana, sans-serif]It is an unethical ploy. Why do they do it? Firstly, they hope it will be so shocking compared to the amount your valuer told you to expect to pay that you will withdraw from the transaction altogether.[/FONT]
    [FONT=Verdana, sans-serif]If that ploy fails, their second hope is that it stretches your expectation of what the final amount is that you will have to pay.[/FONT]
    [FONT=Verdana, sans-serif]Thirdly, you may often find that an offer of an informal lease extension directly follows a high counter offer. (Click here for my full rebuttal of informal lease extension offers)[/FONT]
    [FONT=Verdana, sans-serif]How can you counteract it?[/FONT]
    [FONT=Verdana, sans-serif]I see many people, who are not necessarily clients of ours, become very upset and agitated when they receive the counter offer.[/FONT]
    [FONT=Verdana, sans-serif]The way to counteract it is to expect the counter offer to be ridiculously high and completely ignore it when it arrives as it is 100% stuff and nonsense.[/FONT]
    [FONT=Verdana, sans-serif]Also, DO NOT accept their offers to negotiate the lease extension informally.'[/FONT]

    [FONT=Verdana, sans-serif]Your freeholder has offered to knock £2,000/£3,000 off this ridiculously high price anyway in return for:[/FONT]

    [FONT=Verdana, sans-serif]1 - £2,000 for £200pa increasing by £100pa every 25yrs[/FONT]
    [FONT=Verdana, sans-serif]2 - £3,000 for £300pa increasing by £100pa every 25yrs[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]He will effectively pay you this £2k/£3k in return for the ground rent but do you know how much more your freeholders interest will be worth if you do?[/FONT]
    [FONT=Verdana, sans-serif]Based on a discount rate for the ground rent of 6%:[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]1 - He pays £2,000 for £200pa inc £100pa every 25 yrs. Value to freeholder is £4,088 so a immediate profit of to him £2,088.Or[/FONT]
    [FONT=Verdana, sans-serif]2 - He pays £3,000 for £300pa inc £100pa every 25 yrs. Value to freeholder is £5,857 so a immediate profit of to him £2,857.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]The £4,088 and the £5,857 are the figures you would have to pay him in the future to reduce the ground rent to £0 using another Section 42.[/FONT]

    [FONT=Verdana, sans-serif]So, he has seen a mug coming and is trying to screw you for an extra £4,000, then to rub salt into the wound (dressed up as a favour because he thinks your a mug) he is trying the screw you for an additional £2,088 to £2,857.[/FONT]
  • strawberries1
    strawberries1 Posts: 873 Forumite
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    da_rule wrote: »
    When was the section 42 notice served?

    It was served end of July.
  • strawberries1
    strawberries1 Posts: 873 Forumite
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    anselld wrote: »
    If your surveyor can support the £12,000 calculation and the Freeholder won't budge then apply to the First Tier Tribunal for a determination.

    I used the Lease Advice calculation and put the lower range in the S.42 l. I got a surveyor after completion and receiving the counter notice so he worked it back to get 12k
  • strawberries1
    strawberries1 Posts: 873 Forumite
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    Surveyor will charge £350 + vat to neg but he says he's not sure they'll go lower.
    £18867 was their counter, reduced to £16000 for 0 yrs. 72.9yrs left £260000 value and similar long lease £287850.
    Tom99 wrote: »
    [FONT=Verdana, sans-serif]Your surveyors £112,000 seems spot on and that should be what you pay approx so you can:[/FONT]
    [FONT=Verdana, sans-serif]1 - Pay your surveyor to negotiate, how much extra will he charge for that?[/FONT]
    [FONT=Verdana, sans-serif]2 - If that does not work, apply to the First Tier Tribunal for a determination. How much extra will your surveyor charge for that? But b[/FONT][FONT=Verdana, sans-serif]efore you decide read this:[/FONT]

    [FONT=Verdana, sans-serif]https://www.leaseholdknowledge.com/lease-extension [/FONT]

    [FONT=Verdana, sans-serif]Particularly this bit:[/FONT]
    [FONT=Verdana, sans-serif]'Trick 1: The freeholder’s counter offer will be huge![/FONT]
    [FONT=Verdana, sans-serif]Why is it unfair?[/FONT]
    [FONT=Verdana, sans-serif]You must legally make an opening offer for the cost of your lease extension and your offer has to be ‘reasonable’. Freeholders do not have the same limitations when making their counter offer, it can be as big as they like! It is often a disproportionately large amount.[/FONT]
    [FONT=Verdana, sans-serif]It is an unethical ploy. Why do they do it? Firstly, they hope it will be so shocking compared to the amount your valuer told you to expect to pay that you will withdraw from the transaction altogether.[/FONT]
    [FONT=Verdana, sans-serif]If that ploy fails, their second hope is that it stretches your expectation of what the final amount is that you will have to pay.[/FONT]
    [FONT=Verdana, sans-serif]Thirdly, you may often find that an offer of an informal lease extension directly follows a high counter offer. (Click here for my full rebuttal of informal lease extension offers)[/FONT]
    [FONT=Verdana, sans-serif]How can you counteract it?[/FONT]
    [FONT=Verdana, sans-serif]I see many people, who are not necessarily clients of ours, become very upset and agitated when they receive the counter offer.[/FONT]
    [FONT=Verdana, sans-serif]The way to counteract it is to expect the counter offer to be ridiculously high and completely ignore it when it arrives as it is 100% stuff and nonsense.[/FONT]
    [FONT=Verdana, sans-serif]Also, DO NOT accept their offers to negotiate the lease extension informally.'[/FONT]

    [FONT=Verdana, sans-serif]Your freeholder has offered to knock £2,000/£3,000 off this ridiculously high price anyway in return for:[/FONT]

    [FONT=Verdana, sans-serif]1 - £2,000 for £200pa increasing by £100pa every 25yrs[/FONT]
    [FONT=Verdana, sans-serif]2 - £3,000 for £300pa increasing by £100pa every 25yrs[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]He will effectively pay you this £2k/£3k in return for the ground rent but do you know how much more your freeholders interest will be worth if you do?[/FONT]
    [FONT=Verdana, sans-serif]Based on a discount rate for the ground rent of 6%:[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]1 - He pays £2,000 for £200pa inc £100pa every 25 yrs. Value to freeholder is £4,088 so a immediate profit of to him £2,088.Or[/FONT]
    [FONT=Verdana, sans-serif]2 - He pays £3,000 for £300pa inc £100pa every 25 yrs. Value to freeholder is £5,857 so a immediate profit of to him £2,857.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]The £4,088 and the £5,857 are the figures you would have to pay him in the future to reduce the ground rent to £0 using another Section 42.[/FONT]

    [FONT=Verdana, sans-serif]So, he has seen a mug coming and is trying to screw you for an extra £4,000, then to rub salt into the wound (dressed up as a favour because he thinks your a mug) he is trying the screw you for an additional £2,088 to £2,857.[/FONT]
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    strawberries1 wrote: »
    Surveyor will charge £350 + vat to neg but he says he's not sure they'll go lower.


    Are you sure this surveyor is on your side? RICS yes?
    Spend the £420 but make sure your surveyor knows and is telling the other side that there is no way you are paying anywhere near £16,000. The freeholder is calling your bluff and you have to call his.
  • strawberries1
    strawberries1 Posts: 873 Forumite
    Name Dropper First Post First Anniversary
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    Tom99 wrote: »
    Are you sure this surveyor is on your side? RICS yes?

    Spend the £420 but make sure your surveyor knows and is telling the other side that there is no way you are paying anywhere near £16,000. The freeholder is calling your bluff and you have to call his.

    He's RICS, ALEP and ARMA. He even campaigns for leaseholder rights in parliament.

    He made a point about the similar ppty which sold a month before which went for £289,000. When I use that to calculate it it makes the premium high.

    He caveat-ed accepting to negotiate saying he didn't think he could achieve lower. He said explained the implications of the price I bought it and the price the long lease ppty sold for a month prior.
  • anselld
    anselld Posts: 8,281 Forumite
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    strawberries1 wrote: »
    I used the Lease Advice calculation and put the lower range in the S.42 l. I got a surveyor after completion and receiving the counter notice so he worked it back to get 12k

    I said "if your surveyor can support £12,000". "Working it back" to the number you first thought of will not be a convincing argument at Tribunal.
  • Tom99
    Tom99 Posts: 5,371 Forumite
    First Post First Anniversary
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    strawberries1 wrote: »
    He's RICS, ALEP and ARMA. He even campaigns for leaseholder rights in parliament.

    He made a point about the similar ppty which sold a month before which went for £289,000. When I use that to calculate it it makes the premium high.

    He caveat-ed accepting to negotiate saying he didn't think he could achieve lower. He said explained the implications of the price I bought it and the price the long lease ppty sold for a month prior.
    [FONT=Verdana, sans-serif]I presume you bought this property in the open market after it has been advertised for sale?[/FONT]
    [FONT=Verdana, sans-serif]You, in competition with anyone else who might have been interested, paid £260,000.[/FONT]
    [FONT=Verdana, sans-serif]Therefore you have an open market sale of the subject property on almost exactly the valuation date in the Section 42. Perfect valuation evidence in fact.[/FONT]
    [FONT=Verdana, sans-serif]If your property was worth more than £260,000 why did the sellers sell it to you at £260,000, why did no-one else bid more?[/FONT]
    [FONT=Verdana, sans-serif]The other sale is interesting but not nearly as relevant as the price you paid. They paid £289,000 at a slightly different date and not for your exact property. Maybe they overpaid. They were obviously in the market at the same time as you, so why did they not buy your property and save themselves £29,000. So you have a good case.[/FONT]
    [FONT=Verdana, sans-serif]But lets assume the worst case, you property really was worth £289,000 and you got a bargain.[/FONT]
    [FONT=Verdana, sans-serif]The lease extension calculator using £260,000 and £30pa GR is £11,654[/FONT]
    [FONT=Verdana, sans-serif]But even if you use £289,000 it is still only £12,935.[/FONT]
    [FONT=Verdana, sans-serif]I think you need a different surveyor he does not seem to be on your side.[/FONT]
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