Buying with a short lease (82 years)

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    #16
    Buying a share of the freehold doesn't avoid the need to extend the lease. Share of freehold seems to be ignored by estate agents when valuing a property.

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      #17
      You can access the record of a past LVT judgements kept by LEASE ( lease-advice.org ) by search using the name of freeholder or name of managing agent .

      The current freeholder company owns the "freehold title" to your block of flats and sends annual demand for payment of ground rent.

      Individual leaseholders have a statutory right to make application to extend the lease by 90 years at peppercorn ground rent. This should be done before the lease falls below 80 years as the cost to extend lease will rise due to inclusion of 50% marriage value in the compensation paid to freeholder.

      Collectively, leaseholders in the block need 51% or more acting together through a company, can make a compulsory purchase of the freehold title . Usually after purchase of the freehold title, the participating leaseholders ( being members of the company ) can extend their lease to 999 years lease at Nil ground rent at no charge for 999 years lease extension.

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        #18
        Hi There

        My personal experience with less than 82 years is to avoid as the costs of extending the lease can be high not only that but selling the property will be more difficult. If you can see if you can purchase a new property in addition to this see if you can extend the lease at a lower cost before you purchase it at a reasonable cost.

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          #19
          The cost of the lease ext is simply the sum of the following

          ground rent : the rent is £75 if this is capitalised at 6% this would give around £1250

          reversion : if the flat is worth £400k with a long lease then if the reversion is deferred over 92 years at 5% it is simply

          £400k / 1.05^92 = £4500

          total £5750 plus the landlords legal and valuation fees circa £2000 plus your own a further £2000

          The government needs to step in and produce a defined formula based on the above using prescribed rates for the reversion and capitalisation so lessees can calculate the figure easily using perhaps an online calculator . For a lessee to have to spend £4K getting a valuation in circumstances such as this is wrong . The value of the flat is the only contentious point and in trying to make it easier it may be possible to use council tax bandings and then have a conversion table so say band E in London SW16 = £400k or whatever , slightly skewed in the landlords favour in return for the lessee saving some £4K on valuation fees. The landlord gaining form the deal by getting a better figure

          aside for short lease below say 50 years and high end properties in tax band G & H there really is no need for highly specialised valuations where the premium is so modest compared to the value of the flat

          the above proposals do not impinge on the freeholders human right to compensation

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