Need Help Negotiating Lease Extension Premium

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    Need Help Negotiating Lease Extension Premium

    Apologies for this long post.

    I need your help negotiating my lease extension please.
    My surveyor says there's no point negotiating it as the landlord's proposed figure on counter notice £18,000 (reduced to £16,000 after I rang and negotiated the counter notice) (Now £15,400 after I applied to FTB) is a good offer.

    If a novice like me can reduce it from £18,000 to £15,400 I wonder what a professional can do.

    Below is the LL's surveyor's calc.

    Reading through FTTB judgements it appears the capitalisation rate should be 6.5% not 6%.

    Valuation Date 19/07/2018
    Lease start date 24/06/1966
    Term 125
    Expiry date 23/06/2091
    Unexpired term 72.93
    Rent receivable by landlord £30.00

    5.00% Deferment
    6.00% Capitalisation (this I believe should be 6.5%, shall state tribunal decision on this point)

    VALUES (Wondering about these figures as I purchased at £260,000 with benefit of s.42 notice. Similar ppty sold for £289,000 a month prior to my completion)
    Freehold Vacant Possession £280,000
    Extended Lease Value differential 99% £277,200
    Leasehold Vacant Possession £254,800
    91.00% Differential (Is this Relativity? The graphs give an average of 94.04%, highest being 95.32% lowest is 92.47% ironically this lowest is the graph of the LL's surveyor but for some reason he uses an even lower figure)


    TERM 1 £30.00
    x YP 72.93 years @ 6.00% 16.4288
    £493

    REVERSION FHVP £280,000
    x PV 72.93 years @ 5.00% 0.0285
    £7,977
    £8,470

    Less Value of Landlord's proposed interest £280,000
    x PV 162.93 years @ 5.00% 0.0004
    (Existing term plus 90 years) £99
    Total diminution £8,371

    CALCULATION OF MARRIAGE VALUE
    Tenant's Extended Lease Value £277,200
    Landlords' Extended Lease Value £99
    Sum of Proposed Extended Lease Interests £277,299
    Less
    Landlords' Present Interests £8,470
    Tenant's Present Interest £254,800
    £263,270
    Marriage Value £14,029
    Take 50% Marriage Share £7,014

    PREMIUM PAYABLE
    Diminution in Landlord's Interest (para 3) £8,371
    Plus Landlord's Share of Marriage Value (para 4) £7,014
    ----------------
    Total Premium £15,385
    Say £15,400

    Compare with my surveyor's

    Original Term Lease Length 125
    From Date: 24-06-66
    Valuation Date: 19-07-18
    Freehold Capitalisation Rate 6.5%
    Freehold Deferment Rate 5%
    Extended Lease Reduction (from FHVP) 99%
    Relativity 92.47%
    Ground Rent (years) (Ground Rent) Term 1
    0.00
    £15
    Ground Rent (years) (Ground Rent) Term 2
    72.93
    £30
    Total (years) 72.93

    Extended Lease Term 162.93 GIA 628 sq.ft
    Unimproved FHVP Value £287,879 £458
    87.10%
    Extended Lease Value £285,000 £454
    Existing Lease Value £266,202 £424

    A. DIMINUTION IN VALUE OF LANDLORD'S INTEREST
    A1 Ground rents receivable:
    Rent Reserved £15 YP Term 1 0.0000 £0
    Rent Reserved £30 YP Term 2 15.2288
    £457
    £457
    A2 Reversion to freehold in possession:
    Reversion to VP value £287,879
    x PV of £1 until end of term 0.0285 £8,201
    Freeholder's Present Interest £8,657

    A3 Landlord's interest after grant of new lease of:
    Freehold Vacant Possession Value £287,879
    x PV of £1 until end of new term 0.0004
    £102
    Diminution: £8,556
    B. CALCULATION OF MARRIAGE VALUE
    Value of interests after the lease extension:
    Landlords Interest £102
    Tenants Interest (extended lease value) £285,000 £285,102
    LESS
    Landlords Interest £8,657
    Tenants Interest (existing lease value) £266,202 £274,859
    Marriage Value £10,243
    Landlords share of Marriage Value at 50% £5,121
    Lease Extension Premium £13,677

    I'm drafting my response to the surveyor and will appreciate pointers.

    Thank you.

    #2
    I wouldn't run up any more expense with him IIWY. He obviously can't be *rsed to do anything harder than plug figures into his computer.

    Comment


      #3
      I didn’t see landlord’s fees in all that?

      Comment


        #4
        It's a shame but he refuses to negotiate with the FH or surveyor.
        I told him I didn't even say much before the counter offer was reduced.

        His most recent response is below.

        "The problem we have always had is that the extended lease value of £285,000 (freehold value of £287,879) compared to the price paid for the existing lease of £260,000 produces a relativity of 90.3%. The purchase price included the benefit of the act which should stripped out. Normally a 3% adjustment is required which reduces the existing lease value to £252,200 excluding the Act. Putting the two together produces a relativity 87.6% and a premium of £16,028".

        Yet he had said there was no point him trying to reduce it from the counter offer of 18k.

        Comment


          #5
          If you are only £1,700 apart, I would definitely not incur any more costs, I suggest that you offer to split the difference and avoid the cost of a hearing , which will easily exceed the sum in dispute.

          Comment


            #6
            Originally posted by Tipper View Post
            I didn’t see landlord’s fees in all that?
            LL's costs are:
            £894 valuation
            £1,260 legal
            Will query whether it already includes VAT but probably not so will be added on.

            £220ph + VAT surveyor
            £265ph + VAT legal Grade A outside London (in house sol)

            I need to find decisions to use to negotiate these down too especially as the surveyor and in house sol have acted for LL on similar properties on this road.

            Comment


              #7
              Originally posted by eagle2 View Post
              If you are only £1,700 apart, I would definitely not incur any more costs, I suggest that you offer to split the difference and avoid the cost of a hearing , which will easily exceed the sum in dispute.
              I was hoping for the £12k calculation but happy to meet at £14k

              Comment


                #8
                Originally posted by eagle2 View Post
                If you are only £1,700 apart, I would definitely not incur any more costs, I suggest that you offer to split the difference and avoid the cost of a hearing , which will easily exceed the sum in dispute.
                I would agree totally

                The landlord is seeking a full figure but not an outrageous figure. This is because he knows that the costs you will incur arguing will not make it worthwhile.

                Going to the Tribunal and being professionally represented will cost circa £5k. Going and representing yourself to the Tribunal will carry risks but will involve you having to prepare the case yourself incurring significant time and effort.

                ​​​​​​​

                Comment


                  #9
                  Originally posted by sgclacy View Post

                  I would agree totally

                  The landlord is seeking a full figure but not an outrageous figure. This is because he knows that the costs you will incur arguing will not make it worthwhile.

                  Going to the Tribunal and being professionally represented will cost circa £5k. Going and representing yourself to the Tribunal will carry risks but will involve you having to prepare the case yourself incurring significant time and effort.
                  Thanks.
                  ​​​​​​​From the above, are there any pointers with which I could negotiate down?

                  Comment

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