Lease extension cost

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    Lease extension cost

    Hi all,

    i own a leasehold flat in outer London which has a 82 year lease and £50/annum ground rent. The flat is worth circa £500k.

    the freeholder will agree to extend the lease for £12k (plus their legal fees of £1k). I will have to pay my own legal fees of around £1k too. The extension would be for 90 years with nil ground rent moving forwards.

    i would be grateful for any advice on whether I should accept this or go through the formal legal route and instruct a solicitor to issue a section 42 notice. From what I understand the online calculators suggest a lower premium that what there is in practice and the legal fees of going through the section 42 process is considerably more than an informal agreement.

    Regards
    snoopy

    #2
    A statutory lease ext will cost you 1.83% of the value of the flat ie £9150 and around £800 for the capitalised value of the rent - so around £10k

    ( 1.05 ^ 82 = 54.64. So £500k / 54.74 = £9150 )

    ( £50 per annum capitalised at 6% = £50 / 0.06 = £800 approx )

    its a very easy calculation As you can see from the above and your freeholder knows this and has pitched his offer so it is just worth your while accepting it - they get a better premium and you make a modest saving and the solicitors and valuers get less that they would in a statutory claim

    i advise you accept it but if it drags on to getting close to 80 years you may wish to then serve a statutory claim

    Comment


      #3
      Just make sure that the freeholder doesn't try and slip any unfavourable changes in to the new lease!

      Comment

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