Lease extension estimate please

[cromagnon]

Hi there,

 

I have a query regarding a proposed lease extension.

 

The property is under offer at £860,000

 

There remains 51 years of a 99 year lease with a peppercorn ground rent of £12 per annum.

 

The freeholder has proposed a lease extension of 90 years with an increase of ground rent to £250 per annum for the sum of £110,000.

 

Can this be considered fair or should I negotiate? Should I look for 99 years/keep peppercorn rent/reduce the charge?

 

Many thanks:confused:

[MrShed]

My rough and ready calculation of a 90 year extension at PEPPERCORN rent, would be a gobsmacking £382,803.

 

I would suggest that you snap his hand off.

[MrShed]

Sorry, needless to say I am talking out of my bum....got the spreadsheet wrong

 

A "roughly" fair cost of a 90 year extension at peppercorn rent is actually £118,782. With this in mind, and the fact that the capitalisation of ground rent income under his proposal is a massive £22500 (as opposed to £1250 under peppercorn rent), I would suggest you may want to negotiate this, and potentially take to LVT.

[cromagnon]

Thanks Mr. Shed.

 

Your first reply had be back on my heels.

 

I omitted that they propose the new ground rent of £250 pa be doubled every 25 years.

 

 

I will begin preparing a negotiation in the hope that an agreement can be met without the LVT.

 

Many thanks once again.

[MrShed]

No problem - I must admit I was fairly shocked at the first figure, but I've never dealt with such a short outstanding term extension, so had nothing to compare it to

[cromagnon]

I have just calculated that ground rent of £250pa doubling every 25 years of a 90yr lease is £73,750.

Currently the gound is £12pa or £1080 for the term.

 

Can the freeholder reasonably expect to get this?

[MrShed]

I think that it is not a market value valuation, and would be greatly reduced at LVT, should it go to that stage.

[MrShed]

If you want further info on how to work out approximate value, you may want to read this:

 

http://www.lease-advice.org/levamain.htm

 

But bear in mind that it hasnt been adjusted post-Sportelli case.

[linaver]

Hi,

 

I have a similar question to the one above and would appreciate your much more informed opinions on how fair the freeholder's offer is.

 

The property is under offer at £166,000.

 

There remains 79 years of a 99 year lease with a ground rent of £75pa for the first 33 years, rising to £150 for the next 33 years, rising to £300 for the final 33 years.

 

For £7500, the freeholder has proposed a lease extension of 99 years with an increase of ground rent to £150 pa, doubling ever 20 years.

 

This seems to be quite a lot, considering it's only 79 years, but would like a second (and third) opinion!

 

Thanks

[Bartleby]

Hello my strong advice to the original poster is to take professional valuation advice. You will probably pay around £600 plus Vat and when you are talking about spending in excess of £100k it really would be madness not to protect yourself. In these circumstances a decent valuer will more often than not pay for themselves, not to mention the peace of mind and guidance he/she can offer.

 

Have a look at the list of surveyors on the leasehold advisory service website and find one in your area.

[Bartleby]

Hi,

 

I have a similar question to the one above and would appreciate your much more informed opinions on how fair the freeholder's offer is.

 

The property is under offer at £166,000.

 

There remains 79 years of a 99 year lease with a ground rent of £75pa for the first 33 years, rising to £150 for the next 33 years, rising to £300 for the final 33 years.

 

For £7500, the freeholder has proposed a lease extension of 99 years with an increase of ground rent to £150 pa, doubling ever 20 years.

 

This seems to be quite a lot, considering it's only 79 years, but would like a second (and third) opinion!

 

Thanks

 

 

 

Sorry didn't see how old the original post was.

 

In response to this post, my guess is that a statutory lease extension (i.e. one extending the term by 90 years and reducing rent to a peppercorn) would cost around £6.5k, plus legal/valuation costs for both you and L. So the offer is borderline - is he offering you 99 extra years, or just enough so that you have 99 left?

 

If you are the seller in this market I wouldn't hang around quibbling over this if the sale is dependent on it - try and haggle him down a bit and get the deal done. It favours him but if your buyer is happy the main loss is the ground rent which you won't have to suffer.

 

hope this helps (ps you can get basic valuation advice from leasehold advisory service) (pps your solicitor should be advising you on this!)

[hencloud]

Hi

 

If you would like to discuss the lease extension please feel free to call. We are professional valuers but offer a no obligation discussion.

 

01903 823 188

[hencloud]

Hi

 

If you would like to discuss the lease extension please feel free to call. We are professional valuers but offer a no obligation discussion.

 

www.lease-extension.co.uk

 

01903 823 188

[Lili W]

Hi,

I have a similar question and would appreciate your opinion.

I bought a property in December 2007 for £220K with 64 years lease remaining. At the time of the purchase the landlord gave me the price for lease extension £20,922 (in 2007).

Now I would like to proceed with the lease extension and the cost of the premium given to me recently by the landlord is £20,575. As we all know the house prices dropped since 2007 and current price of a property on my street is about £189,900 or less. Is the cost of lease extension considerable or I should negotiate? Many thanks.

[LeaseholdDoctors]

Hello Lili,

definitely negotiate.

That premium seems high.

Also make sure that the freeholder is offering an additional 90 years, so a total of 162 years all at zero ground rent (which is what a formal Claim would require).

 

regards John

http://www.leaseholddoctors.co.uk

Edited April 21, 2009 by LeaseholdDoctors

[AmershamO]

Bear in mind that you need to have owned the property for the minimum 2 year period to qualify for a statutory lease extension (90 years added to the existing term and ground rent becomes a "peppercorn" i.e. nil)

 

Regards, David

www.surveyorandvaluer.co.uk

[messyjessyr]

Hi,

 

On a similar topic... I bought my house in 2005 for £170. Now I am selling it in 2010 for £235. There are now 73 years left on the lease. Ground rent is £50 per year. The quote I got from the surveyor was £16,750, but he was very vague on things and also didn't provide a figure for us to put into the notice to serve on the landlord. 3 questions - 1. Does this sound like a reasonable premium? 2. How much less than the estimate should the figure in the notice normally be? 3. Would this quote be for 90 years extension? He didn't specify...

 

Thanks.

[AmershamO]

I assume that you mean flat, not house.

 

You should ask your Surveyor for a "best case" figure to insert in the Section 42 Notice.

 

If it's a valuation under the 1993 Act then it will be for a 90 year extension to your lease. This should have been made clear in the report but you should clarify this with your Surveyor.

 

Regards.

[Real Opinion]

Hey - new here but Have just spent an age reading up on this so thought I'd post on the thread for other users.

 

The Lease Extension Valuation can take two routes; formal and informal. You need to choose which route to go before you get a valuation.

 

As a rule formal routes are for Leaseholders who want to extend by the statutory 90 years with no ground rent. The process is prescribed and you have protection through the Reform Act 1993.

 

The informal route is best left for Leaseholders who have a good relationship with their Freeholder and want to increase their lease by a variable amount of years and don't mind the ground rent remaining in place.

Edited November 10, 2014 by honeybee13
Commercial website removed.

[raydetinu]

RO, cant really see the point on posting on old threads!

If any body has a problem now, they will start a new thread and hopefully get current advice.

You probably have sound advice to give, but of limited value on old threads, as most people will not trawl though old threads!

suggest you wait until a new thread or question comes up.

[Real Opinion]

Thanks - I'll keep an eye out for some more recent thread.