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    • morlox
    • By morlox 6th Nov 18, 10:46 PM
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    morlox
    Lease Extension - Help
    • #1
    • 6th Nov 18, 10:46 PM
    Lease Extension - Help 6th Nov 18 at 10:46 PM
    I've been in my flat for the required 2 years and I'm now looking to sort out the lease extension.
    We recently remortgaged the flat and it was valued at 185K with 72 years left on the lease.


    I have approached the Freehold to negotiate the extension and they have come back with the following terms:


    Extend to 125 years
    Cost: 19, 675
    Ground Rent: 200pa doubling every 25 years or RPI increase every 10
    Landlord costs: 600


    This seems incredibly high to me. Looking at lots of online calculators, I was anticipating more around the 12 - 14K mark for a statutory increase of 90 years.


    There are no solicitors or surveyors involved yet. I'm not sure if I should go ahead and just go down the statutory route, or give them a number of my own, or get a surveyor/ solicitor involved at this point?


    I should say, we would like to extend as inexpensively as possible. We don't intend to be here for too many years. Ideally, an informal extension to 99 years around the 10K would be more what we had in mind, but I don't want to shoot myself in the foot if that's going to cause problems down the line.


    Any advice, greatly received! It's very confusing this whole thing.
Page 1
    • Tom99
    • By Tom99 7th Nov 18, 1:28 AM
    • 2,992 Posts
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    Tom99
    • #2
    • 7th Nov 18, 1:28 AM
    • #2
    • 7th Nov 18, 1:28 AM
    What will your lease be worth when you extend it?
    Quite possibly less than 200k so you will make at least a 5k loss on the deal currently offered.
    The new ground rent of 200pa with RPI every 10 year may not be too onerous but when you come to sell and your competition is a similar flat with 37yrs more on the lease and no ground rent, which would you choose?
    A statutory lease extension will take longer and will cost more in fees but its reasonable to expect your all in costs to be less than 15,000 and for a more attractive lease when you come to sell.
    You can of course negotiate, for example tell the landlord your very best offer is a 162yr lease at 0 ground rent and a premium of 13,000 plus a max of 600 costs.
    • morlox
    • By morlox 9th Nov 18, 8:00 PM
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    morlox
    • #3
    • 9th Nov 18, 8:00 PM
    • #3
    • 9th Nov 18, 8:00 PM
    I'm not sure what the lease will be worth. How do you find that out? I think you are right though, that I wouldn't be looking at more than 200K.


    Out of curiosity, how did you arrive at the number for 15K? If that's what we'd be looking at all in, that might be the better way to go.
    • da_rule
    • By da_rule 9th Nov 18, 8:19 PM
    • 2,785 Posts
    • 2,449 Thanks
    da_rule
    • #4
    • 9th Nov 18, 8:19 PM
    • #4
    • 9th Nov 18, 8:19 PM
    You need a properly qualified surveyor to work out the valuations and then give you guidance on what you should be offering for a statutory extension.
    • Tom99
    • By Tom99 10th Nov 18, 12:47 AM
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    • 2,061 Thanks
    Tom99
    • #5
    • 10th Nov 18, 12:47 AM
    • #5
    • 10th Nov 18, 12:47 AM
    I'm not sure what the lease will be worth. How do you find that out? I think you are right though, that I wouldn't be looking at more than 200K.
    Out of curiosity, how did you arrive at the number for 15K? If that's what we'd be looking at all in, that might be the better way to go.
    Originally posted by morlox
    If your remortgage was at a fairly low LTV the 185,000 may not be dead accurate. 72yrs is not a common lease length to sell on the open market so the surveyor would not have had many, maybe no, comparables to work with.

    If you went the statutory route then both parties surveyors would first determine the value of the new long lease. Then they would look to agree a relativity factor, that is Old Lease Value divided by New Lease Value and expressed as a percentage.

    You can get a rough idea of the relativity %age here:
    https://www.freeholdcalculator.com/leasehold_extension.php

    Using that calculator the relativity outside Central London for a 72yr lease is 93.98% so if your flat is worth 185,000 now it will be worth 185,000/0.9398 = 196,850 with the new 162yr lease.

    Since you lease is below 80yrs and marriage value will have to be shared 50%/50% this relativity %age is a component in the calculation. It very far from the exact science the above precise looking figures would suggest.

    You don't state your existing ground rent and ground rent reviews so my 15,000, all in, was just rounding up the figure of 12k-14k for some costs.

    One way of looking at whether informal terms are good value is to look at how much you would have to pay to apply a statutory lease extension to these informal terms and compare it you your 162yr lease at 0 ground rent.

    If you wanted to extend the proposed 125yr lease at 200pa rising to 215yrs at 0 it would probably cost about 5,000 depending how you value the ground rent increases.
    Compare that with extending the statutory 162yr lease at 0pa to 252yrs at 0pa which would cost about 75.

    Therefore the freeholder is retaining 4,925 of value for themselves which would have been yours had you gone the statutory route instead.

    Given your existing lease length I think it would be well worth employing an RICS surveyor now so that you will have a much better idea of how various figure compare before you go any further.
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