Lease extension valuation

[stepic]

Hi all

 

I was just hoping for some help with this.

 

I bought a property for £235k 2 years ago. There is a ground rent accumulator within the lease that starts at £250 per year and doubles every 10 years until the 50th anniversary, so in other words in 50 years the ground rent will be £8k per year. The lease is 125 years, so 123 years to go at present. Obviously I would like to remove this ridiculous clause. I have requested a valuation from the freeholder to extend my lease by 90 years and thereby reduce the ground rent to a peppercorn. They have quoted £22,950 + £845 legal costs + £575 valuation and processing fee, so £24,370 in total.

 

I was hoping to get some advice in terms of - is this an accurate figure? And if not, what can I do - should I write them back a letter and try and agree a lower fee? If so, what kind of fee should I be asking for? I would ideally prefer to avoid the legal route as I figure that will just create more costs, but I guess I kind of want to know how inflated this figure is, as I'm sure they're trying to push their luck.

 

They also offered the following deal:

 

A premium of £15,950.00 (Fifteen Thousand Nine Hundred and Fifty Pounds)

Exclusive of our legal costs of £845.00 (+ VAT if applicable)

Exclusive of valuation and processing fees of £575.00

A new ground rent of £250.00 per annum to increase every 20 years by the higher of the increase in the Retail Price Index or twice the current ground rent as at the month immediately preceding each rent review period

 

This still ends up being £8k per year after 120 years, but due to inflation this is obviously less onerous than the current accumulator.

 

Any advice would be gratefully appreciated, particularly whether I should negotiate down on the original offer, or take up the second offer. I am particularly interested in whether the 2nd offer would affect future resale value?

 

Many thanks

[stepic]

If inflation averages 2.5% for 123 years the value of £8000 in 123 yrs time would be Around £350, so not particularly an issue... just wondering whether it's better to pay the smaller amount rather than go back and fight the original offer and incur legal costs which may wind up being more than the second offer. My primary concern isn't so much £x per year ground rent but also rather the affect on resale value.

[stepic]

Actually, I think I worked it out wrong.

 

£250 per week doubling every 20 years for 125 years, would be doubling six times. So this would b:

 

0-20 £250

21-40 £500

41-60 - £1000

61-80 - £2000

81-100 - £4000

101- 120 - £8000

121+ £16000

 

Is that correct? And if so, what figure would £16k be @ 2.5% inflation?

 

Anyone with any assistance in this area - all help would be appreciated!