is this lease extension+ costs expensive ?

[chris16v]

i have requested "informally" by letter a lease extension from my freeholder to extend my current lease of 73 years. I have a 2 bed flat in the south Norwood area ( value approx £150K). The response from the freeholder was quick but they have asked for £11500 for the lease, £600 solicitors, £300 initiation of transaction fee and £40 for each document. they also want to increase the ground rent from £50pa to £250pa increasing by £100 every 10 years. They have only offered to reset the lease back to 99 years, essenially meaning a 27 year extension.

Is this excessive ? ( i think so? ) and what about these extra costs ?
I have lived at the property for 6 years and i am aware of the 1993 act to serve notice for a new 99 years and peppercorn rent. Is the new 99 years added to my 73 ? is this generally a long process ? and how should i proceed ?

can anyone advise......
thanks

[Corinne Tuplin]

Dear Chris,

It would be a good idea to ascertain how much a statutory lease extension should cost before proceeding further. A statutory lease extension is a further ninety years in addition to your current term on a peppercorn rent (i.e. one pence a year).

You can find out more information about this on the Pro-Leagle website:-
http://www.proleagle.com/leaseextension.htm

Valuations cost £60.00 (inc. VAT) and you should be able to use this to attempt a re-negotiation of the proposed cost. £11,500 does seem excessive
for a twenty-seven year extension. If you are unable to negotiate successfully with the freeholder, you should be able to use the formal process.

Information about Lease Extension Valuations and how they are calculated can be found by clicking here:-
http://www.proleagle.com/leaseextension3.htm

I hope this assists.

CORINNE TUPLIN
DIRECTOR
PRO-LEAGLE
www.proleagle.com

[tenant29]

What is the name of your freeholder company ? Several visitors to this site have reported similar offers from their freeholder


The procedure for extending you lease for 90 years at a peppercorn ground rent is given in a manual issued by the former Office of the Deputy Prime Minister . You have to negotiate ( and threaten to take them to the LVT ) to get the best prfice. You should downloan the manual from-

http://www.communities.gov.uk/pub/696/ResidentialLongLeaseholdersaguidetoyourrightsandre sponsibilitiesPDF1402Kb_id1151696.pdf

Offering you an extension of only 27 years is an attempt to take advantage of naive leaseholders. If you accept their offer to extend back to 99 years , you will have the same problem after 19 years.

[propman2]

generally, when a lease has 40 years left unexpired depreciation then kicks in with a vengeance

Maybe it becomes unmortgageable.

I think Landlord is trying to extract a capital receipt early so listen to more experienced advise on here

[chris16v]

Tenant29,
thanks for your opinion. I also think that they are trying it on a bit. However at the end of the day they are the ones who can extend the lease so i want to find some common ground with them. I am sure that their first offer is not their best !
My short term intention is to sell the flat soon, but with 73 years remaining i think its worth me looking at extending before selling.
What angle can i take with the freeholder? should i get a professional valuation for the extension and then threaten them with the 1993 act for a futher 99 years but instead then offer to comprimse on a much shorter BUT cheaper extension? is this the way to go ? is this logical ?
At the end of the day my goal is to secure maybe 20/30 years extension at the cheapest price.
any thoughts or opinions would be greatfully recieved.

[tenant29]

You should read the thread " extend lease 75years " started on 19 July 2006 by Jim Child and in particular the reply by Karonga on 20 July 2006 .

You should follow Karonga's experience and try to get a similar result.

[specialist]

[Dear Chris
we are in a smillar position why notjoin forces with the rest of the leaseholders and buy the freehold I belive this is only goping to cost 20 X ground rent
Good luck

[chris16v]

thanks for your input specialist. This does sound constructive but since i let the flat out, (currently) and also i have not lived their for a few years and i no longer know the other leaseholders, i suspect this would be a frustrating exercise.
Unless anyone can advise otherwise,i am going to proceed with a valuation for the lease extension and hopefully use this as a starting point for negotiation.
The ideal result for me would be a reasonable length extension at the cheapest price. Will freeholders generally listen to any reasonable offer, if in their interest of course? would that be normal ? baring in mind that they have responded quickly to my initial informal request to extend.
I have been reviewing the outcomes of LVT cases on http://www.lease-advice.org and although making a good read, its hard to apply the cases to any individual circumstances.

[Markonee1]

Go back to the LVT decided cases and search for lease extensions where there are 72 to 76 years left. check what uplift there is as a % of a flats existing value to the value given for a 90 yr extension ie (72 +90) at a peppercorn rent. Apply this to your flat for a guestimate. Half of this is the marriage value due to the landlord.
There is a graph of decided uplifts under the sites annual summary stuff.

Also work out the present value of the current groundrents (annuity formula) for 74 years Also the current amount of money needed to compound to the sum of the value of your flat in 74 years.
Use
7.5% as a compounding figure
ie flat value x (1.075)^-74 [^ means to the power of]
Any hope value for the landlord? (further development potential) etc etc

Adding all of the above will give you a guestimate of the costs of your enforcible legal right (+ his REASONABLE legal costs)

ANNUITY FORMULA
[1-(1.075)^-74]/0.075 .... x by groundrent.... If groundrent increases in stages then do each period separately and remember to use the present value formulae to bring each period to a current value

EAOE NaCl etc

[tenant29]

Chris,

What is the name of the landlord company and managing agent which is asking for increased ground rent ?

You said - " The response from the freeholder was quick but they have asked for £11500 for the lease, £600 solicitors, £300 initiation of transaction fee and £40 for each document. they also want to increase the ground rent from £50pa to £250pa increasing by £100 every 10 years. "

Increasing the ground rent will adversely affect the sale price on your property whilst a peppercorn ground rent with 163 years term lease will get you the best sale price.








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[chris16v]

the property is self managed and the freeholder is a company called resolute property management ltd in north london.
I can see what you are saying about increasing the ground rent, this is not a desirable thing to do. If i am only interested in selling the property and getting an extension result quickly, then how should i proceed ?
is it normal practice to serve notice on the freeholder and pass this over to a potenial buyer ( if they want to do that of course ) ? is this something i can look at and would it be straight forward to do ?

[tenant29]

1. The procedure for serving notice on the freeholder company is described in page 42 of manual which can be downloaded from a website ( see the email on 26 Aug.).

2. Before you start, you need to get a valuation of your property with 73 years lease paying ground rent and with 163 years lease and no ground rent payment by a chartered surveyor . ( Ask the one recommended by Karonga) in order to justify your counter offer .