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    • John Chip
    • By John Chip 15th Jan 20, 11:55 AM
    • 35Posts
    • 1Thanks
    John Chip
    Extending low lease - value calculation?
    • #1
    • 15th Jan 20, 11:55 AM
    Extending low lease - value calculation? 15th Jan 20 at 11:55 AM
    Hello,

    I am the joint freeholder in a multiple block of flats.

    The owner (leaseholder) of one of the flats passed away in December.

    The lease is low - 63 years.

    The family are wanting to sell the flat and want to know how much It would cost to extend the lease.

    As a rough rule others have told me 10% - then ‘marriage value’

    They have got some valuations in which vary — one is quite low.

    How do I calculate the cost of extending? - as obviously I don’t know what it will sell for in advance - it’s true value at this point.

    Thanks in advance

    John
Page 1
    • eddddy
    • By eddddy 15th Jan 20, 12:07 PM
    • 8,965 Posts
    • 9,355 Thanks
    eddddy
    • #2
    • 15th Jan 20, 12:07 PM
    • #2
    • 15th Jan 20, 12:07 PM
    I am the joint freeholder in a multiple block of flats.
    Originally posted by John Chip
    Do you mean that all the leaseholders are joint freeholders?

    A 'typical' freeholder might say...
    I need to instruct a RICS valuer to calculate the cost of a lease extension. The valuer's fee will be £x (maybe £500), so you'll need to pay me that in advance.
    But you are free to calculate the cost anyway you choose.

    As a rough rule others have told me 10% - then ‘marriage value’
    Originally posted by John Chip
    No.

    There are a few calculators on the internet you can use to get a rough idea:
    https://www.lease-advice.org/calculator/
    https://osborneslaw.com/property-law/leasehold-extension-calculator/
    • John Chip
    • By John Chip 15th Jan 20, 1:06 PM
    • 35 Posts
    • 1 Thanks
    John Chip
    • #3
    • 15th Jan 20, 1:06 PM
    • #3
    • 15th Jan 20, 1:06 PM
    Hello,

    No the leaseholder’s are not joint freeholders.

    The owner of the flat was a leaseholder and let his lease run down to 63 years. He has now passed away.

    They have had a low valuation and want to base the cost of the lease extension on that - as it won’t cost them so much as it would do if the valuation was higher.

    So - do I get it independently valued?

    Thanks agai
    • eddddy
    • By eddddy 15th Jan 20, 2:08 PM
    • 8,965 Posts
    • 9,355 Thanks
    eddddy
    • #4
    • 15th Jan 20, 2:08 PM
    • #4
    • 15th Jan 20, 2:08 PM
    So - do I get it independently valued?
    Originally posted by John Chip
    It's entirely up to you.

    As it stands, you can ask for any price you like - for example, £1 or £100,000

    If you want to charge a 'fair' price, ask an RICS valuer.

    They have had a low valuation and want to base the cost of the lease extension on that - as it won’t cost them so much as it would do if the valuation was higher.
    Originally posted by John Chip
    That's not surprising. It's just haggling - like on a street market.

    What evidence do you have that the leaseholder's valuation is sensible?
    • The leasholders might offer £5,000 (knowing that it's a stupidly low price)
    • Your counter offer could be £25,000 (knowing it's a stupidly high price)
    • A RICS valuer may say that a fair price is £15,000


    On the basis that you don't seem to understand how lease extension valuations work, I would suggest that you instruct a specialist RICS valuer (who the leaseholder pays for in advance).
    • AdrianC
    • By AdrianC 15th Jan 20, 2:32 PM
    • 27,684 Posts
    • 27,872 Thanks
    AdrianC
    • #5
    • 15th Jan 20, 2:32 PM
    • #5
    • 15th Jan 20, 2:32 PM
    They have got some valuations in which vary — one is quite low.

    How do I calculate the cost of extending? - as obviously I don’t know what it will sell for in advance - it’s true value at this point.
    Originally posted by John Chip
    Work the other way. You know what the long-lease value would be, right...?
    • Tom99
    • By Tom99 16th Jan 20, 6:03 AM
    • 5,231 Posts
    • 3,689 Thanks
    Tom99
    • #6
    • 16th Jan 20, 6:03 AM
    • #6
    • 16th Jan 20, 6:03 AM
    Hello,

    No the leaseholder’s are not joint freeholders.

    The owner of the flat was a leaseholder and let his lease run down to 63 years. He has now passed away.

    They have had a low valuation and want to base the cost of the lease extension on that - as it won’t cost them so much as it would do if the valuation was higher.

    So - do I get it independently valued?

    Thanks again
    Originally posted by John Chip
    As said they have it the wrong way round. The shorter a lease is the more expensive it will be to extend.
    You should enquire from an RICS surveyor the cost of providing you with a valuation for lease extension purposes and pass that information on to the leaseholder.
    If you want to be fair to the leaseholder you might also point out that they will be liable for your valuation/negotiation and legal costs and, also, they have a statutory right to extend the lease providing the deceased owned the flat for at least 2yrs.

    You can get a rough idea of what the leaseholder might have to pay you here:
    https://www.freeholdcalculator.com/leasehold_extension.php
    As a rough guide for a 63yrs lease it will be 16x the ground rent (more if there are future increases in the ground rent) plus about 7.5% of the value of the new extended lease.

    Say the ground rent is a fixed £150pa and the value of the new extended lease is £150,000
    1 - £150 x 16 = 2,400
    2 - £150,000 x 7.5% = £11,250
    Total = £13,650
    Plus your surveyor and legal costs.
    For that they will get a 153yr lease at £0pa ground rent.
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