Buying freehold (short lease)

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    Buying freehold (short lease)

    Hi,
    Looking for some advice. Struggling to find anything relevant through the usual methods.

    I bought a house with just 30 years remaining on the lease. There was a ground rent review coming up 18 months after purchase in which the ground rent increased from £500 to £1500. The previous tenant agreed to serve notice and assign the benefit to me. The solicitor did not file the section 42 correctly and as a result that benefit is now lost and I have to wait two years since purchase.

    1) how much more expensive will the freehold be to buy in two years time? (An approx % maybe?)
    2) if I bought before the ground rent review, would the freehold have been cheaper? (ie if I purchased the freehold as intended before the review, would it have been substantially cheaper because of the rent being £500 instead of £1500 - ignoring the fact that there will be two less years left on the lease)
    3) does the condition of the property affect the freehold value? Ie if the property was newly renovated vs a property in a poor state of repair

    Thanks for any advice

    #2
    The free guide may help you :

    https://www.lease-advice.org/advice-...ses-valuation/

    Also read the Guardian issue 21 Dec 2017 about leasehold reform and to end leasehold houses

    Comment


      #3
      Purchasing before the rent review kicks in will not effect the principal that in valuing the stream of ground rent it will take into account the increase of ground rent in 18 months. It is a mathematical formula taking into account all future rises

      if the ground rent rises to £1500 in 18 months the value of that income at a 5% discount rate ( the rate would be low as the rent is so high) would be at least £30k and on top of that there would be the value of the reversion and possibly marriage value of the term is below 80 years.

      The oroperty is valued in the basis that the flat is in good order and has a long lease with a nil ground rent. The term often used is “in lease maintained condition “

      the sums for your lease extension will be very significant and with the failure by the vendors solicitors you need to be taking legal advise and appointing solicitors who are experienced in such matters - sites such as this can only give pointers as to what to do.

      If irthe price you paid for the flat did not take into account the likely premium you would be required to pay you need to take legal advice before instructing solicitors

      it seems you may have been advised very badly

      Comment


        #4
        Thanks gordon - I've read the link above but not the guardian article above so will take a look.

        Originally posted by sgclacy View Post
        Purchasing before the rent review kicks in will not effect the principal that in valuing the stream of ground rent it will take into account the increase of ground rent in 18 months. It is a mathematical formula taking into account all future rises

        if the ground rent rises to £1500 in 18 months the value of that income at a 5% discount rate ( the rate would be low as the rent is so high) would be at least £30k and on top of that there would be the value of the reversion and possibly marriage value of the term is below 80 years.

        The oroperty is valued in the basis that the flat is in good order and has a long lease with a nil ground rent. The term often used is “in lease maintained condition “

        the sums for your lease extension will be very significant and with the failure by the vendors solicitors you need to be taking legal advise and appointing solicitors who are experienced in such matters - sites such as this can only give pointers as to what to do.

        If irthe price you paid for the flat did not take into account the likely premium you would be required to pay you need to take legal advice before instructing solicitors

        it seems you may have been advised very badly
        Hi sgclacey.
        Thanks for the reply.
        I was aware of the significant cost of purchasing the freehold beforehand. The price I paid for the property reflected this significant cost.
        It was actually my own solicitor who failed to serve notice correctly.
        Am I correct in thinking that because of the failing by my solicitor to serve the notice correctly I am now financially disadvantaged?
        I will of course be taking legal advice in the coming weeks - as you say, just looking for some pointers.

        Comment


          #5
          yes I think you are!

          Comment


            #6
            The amount of your loss would over a 2 year period be approx 11% of the premium you should have paid plus property inflation over that period. So if property prices rose by10% over the period then your premium for a lease ext would be around 21% more

            Comment


              #7
              Thanks sgclacy - So as a result of my solicitor not serving the notice correctly - and me now having to wait another two years, I will have to pay another two years of ground rent along with an 11% higher premium? Ie if it was estimated to cost £50k to buy the freehold at completion I'll probably be looking at £55.5k in two years time?

              (Does this 11% apply to leases with only 30 years remaining?)

              Comment


                #8
                The right to a statutory 90 years lease extension on a leasehold flat comes under L&T Act 1987 and 1993.

                The right to 50 years lease extension or buying the freehold title for leasehold houses comes under the L&T Act 1967 .

                You should download the free guide to cost of purchasing the freehold from www.lease-advice.org.

                Comment

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