66 to 99 year leasehold extension for £12,000?

[bigblueworld]

Can anyone please advise me on a leasehold extension?

I am buying a flat in E17 for £223,000. Included is a proposed leasehold extension from the current 66 years remaining (ground rent is £25 a year) to 99 years (with a Deed of Variation increasing the ground rent to £175 a year) at a cost of £12,000.

Is this a fair deal? Is it usual, or even sensible, to extend the lease for 33 years? From the online calculators, it seems that a statutory extension of +90 years will cost me between £15,000 and £20,000 so that would be a more expensive option. What should I do?

[jeffrey]

For how long has V owned the existing leasehold: at least two years?

[anothertoy]

it sounds reasonable. here are my calcs:

to extend your lease for an additional 90 years and pay peppercorn rent is approx 16.7k (mainly due to the marriage value)

the value of the new lease TO the freeholder is 4.5k (ie. freeholder should pay this to you for the privilege of getting 175 p.a. in rent).

so you pay 16.7k and get back 4.5k = 12.2k (which you net pay).

all my calcs were done at 5% reversion yld and 7% capitalisation rate which is the LVT price.

[bigblueworld]

Thanks for the replies. The vendor has been the leaseholder since 1990.

[jeffrey]

Thanks for the replies. The vendor has been the leaseholder since 1990.
Good. So V could serve on L a statutory Notice of Claim [s.42 Notice] and assign to you the benefit of it.

[sgclacy]

it sounds reasonable. here are my calcs:

to extend your lease for an additional 90 years and pay peppercorn rent is approx 16.7k (mainly due to the marriage value)

the value of the new lease TO the freeholder is 4.5k (ie. freeholder should pay this to you for the privilege of getting 175 p.a. in rent).

so you pay 16.7k and get back 4.5k = 12.2k (which you net pay).

all my calcs were done at 5% reversion yld and 7% capitalisation rate which is the LVT price.

I would add that the relativity at 66 years is around 88% and using the same parimeters as above the cost of the lease extentsion would be around £18k so the deal as anothertoy has said previously is fair

However this is an offer outside of teh Act and, with the greatest respect to jeffrey, I belive you do not serve a Section 42 Notice is these circumstances as the statutory route gives you a 90 year extentsion and a peppercorn rent

[bigblueworld]

I would add that the relativity at 66 years is around 88% and using the same parimeters as above the cost of the lease extentsion would be around £18k so the deal as anothertoy has said previously is fair

However this is an offer outside of teh Act and, with the greatest respect to jeffrey, I belive you do not serve a Section 42 Notice is these circumstances as the statutory route gives you a 90 year extentsion and a peppercorn rent

Am I right in thinking I would only want an S.42 notice if I wanted to take a statutory route to the leasehold extension? As I plan to be in the property for less than 10 years, perhaps less than 5, is it better for me to accept this deal (which you say is fair) and the 99 year lease it gives me? Selling the property on then with say 89 or 94 years left on the lease would be no problem, I would have thought. To go a statutory way would give me a 90 year extension, but would cost a lot more money (£4-6k). What would you advise?