Lease extension- 56yrs. unexpired, high premium demanded

[kathy]

Hello, i hope you can advise me. 3 months ago we bought a leasehold flat in a terrible condition as a business venture. Its our first one. We've just completed the renovation which cost about £17,000. and its now a classy beautiful flat. The flat has got 56 years lease. We have been told the extention lease will be £24,000. As we paid £75,000. for the flat, 24 seems a ridiculous amount to be expected to pay on top. Can people charge what they like to extend a lease. Please help if you can, we are pannicking.

[Poppy]

I am the freeholder of a block of flats on long leases.

What attracted you to a flat with a lease with 56 years unexpired? Whatever your reasons were perhaps you could find a potential purchaser with the same outlook and simply not extend.

Did you buy the flat with the intention of renovating and selling on immediately or did you buy it to live in? If the former, then you would have been wiser to have extended the lease at the time of purchase.

The premium of £24,000 that you have mentioned represents many factors to the landlord/freeholder:

1. the diminution in the value of the landlord's interest in the flat; that is, the difference between the value of his interest now with the present lease and the value of his interest after the grant of the new lease with the extra 90 years.

2. the landlord's share of the marriage value

3. compensation for loss arising from the grant of the new lease

Between yourself and the landlord you must negotiate what it is worth to extend the lease for a minimum of 90 years. It's not just a box-ticking exercise.

I recommend that you visit the Leasehold Advisory Service website and learn about your rights and your freeholder's rights. www.lease-advice.org

[Tax Accountant]

You are strongly advised to seek a valuation from an agent who can calculate how much you should be expected to pay for increasing the lease period.

I was quoted £ 7,500 for extending from 82 years remaining to 125 years.

Thanks to valuable feedback from this forum, the freeholder came down to £3,000 after only one letter. I have now engaged a valuer who has calculated the charge at approx £1,000 plus freeholder's costs.

Most freeholders will try to reap you off. (No offence to you Poppy)

As they say, buyer beware.

Editor, thanks for the good advice.

Ramnik

Ramnik

[Tax Accountant]

If you don't know of a good agent, let me have your email contact details and I will let you know the contact of the agent I used. No relation and no commission to me. Just trying to help. The agent charged me £200+vat for valuation and a further £100+vat to negotiate with the freeholder.

But at least read all the stuff on the advisory website mentioned by the editor at the beginning of this thread.

Ramnik