Property purchase - 54 yr lease

[nirajshah]

Hi

I have seen a flat which i have managed to negotiate a price of 175k with a 54 yr lease remaining

Property with a new lease is worth about 210k to 220k

How much will a lease extension cost?

Agent thinks Ground rent is £100

MAny thanks for your help

[sgclacy]

Hi

I have seen a flat which i have managed to negotiate a price of 175k with a 54 yr lease remaining

Property with a new lease is worth about 210k to 220k

How much will a lease extension cost?

Agent thinks Ground rent is £100

MAny thanks for your help

I would be very surprised if teh rent was as high as £100. But to be cautious I will assume that is correct


1) Capitalisation of the ground rent at 7.25% would equal approx = £1380

2) Deferred value of the reversion at 5%. First need to establish what the flat would be worth with a long lease say £215k

£215k / (1.05^54) = £15,425

3) Marriage value: Relativity at 54 years can be in the range of 80% if we accept the decisions of the LVT over the last 10 years or 72% if the landlord is able to argue that the Savills graph of 1992 is correct (I think it is but the LVT do not support it nad this is of course rather important). We will assume 78%

£215k X (100% - 78%) = £47,300 less £1380 less £15425 = 30,495 X 50% = £15248

Premium for a 90 year extension could be of the order of £1380+£15425+£15248 = £32,053 the ground rent to be a peppercorn. In addition you would be liable for teh landlords valuation fee plus certain elements of his legal costs. Budget for another £1,000