Negotiating a lease extension

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    #16
    We are in this case told that the freeholders offer is £18k and the lessee has been advised at £15k and the suggestions in this thread by myself and others are based on those two figures and as flyingfreeholder advised the premium at 69 years is 10% and for approximation purposes I would concur with that.

    It would be more helpful as you state if there were more details but as the OP has given us only brief details I think everyone has tried to be as helpful as possible based on that limited information

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      #17
      Yes, everyone has been very helpful thank you very much for taking the time to reply.
      I kept things brief so I don't get identified. But yes, everything you have all said concurs, including the premium being about 10% of resale price. So, I think it is safe to say that 14-15k is a realistic premium.
      sgclacy, good point about offering the f/h a deal before the reforms.Marriage value is about 7k according to surveyor calculations. So "if" that was abolished, it would greatly reduce the premium. However, as the lease length goes down, the premium goes up. And as stated in the original post, I am not in a position where I can keep the property so I don't have the luxury of waiting for the reforms to pass through Parliament.
      I will probably offer 11k/12k rather than 14k. You can always negotiate up but you can't negotiate down.

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        #18
        Submit your offer with a copy of the Government Minister's statement dated 7 Jan 2021.

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          #19
          I tried the direct route a few years ago, being in a similar position to you, with similar amounts of money and same term remaining. I thought that dealing direct would be the easiest for me, and able to offer a more flexible approach. So perhaps like you was more interested in making the property more attractive for a sale. So given that thought that the best way was to suggest, early, Ground rents staying similar but loading the back end, and only asking for a return to a 99 year lease per the original lease. Thus getting rid of the immediate issue of mortgageability, and still giving any new owner time 20 years before any issue of marriage value......One of the benefits I was suggesting was that the freeholder would have a built in extra premium due to further extension being needed in maybe 20 years time........needless to say that didnt work and I gave up.

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            #20
            Oh really? That sounds like the kind of deal I would be looking for. Why did it not work if you don't mind me asking? And did you have to go down the statutory route then?

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              #21
              Hi
              I have no idea why it was not even negotiable to the Freeholder. I looked at the revenue he would have with ground rent for the remaining untouched term and made sure that more would be received for the remaining untouched term and would have agreed to a much higher load at the end of my proposal, added to which I was offering about 40% up front cash for the extension, But I do not know how blocks of flats are actually valued. Evidently not the way I thought possible. No I did not go ahead and still own the property, the lease will out live me. But I might just look to sell it at a lower price, certainly in my area the flat would not have been worth anything like what was wanted for the extension.

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                #22
                While "another bite of the cherry" in 20 years is a small factor , it won't much affect the value to the freeholder as any change to legislation could happen in the meantime, or he might pass away !!
                Keeping a ground rent element is of immediate value to him as it means he can always sell the freehold, as well as increasing the cost of a statutory extension to any future leaseholder, win win.

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                  #23
                  lampshade,

                  Did you have a surveyor giving you an estimate of the premium? I did that - it costs about £600 - He sent me the calculations as part of his report. Might be worth doing.
                  Even if the f/h doesn't accept your informal offer, you have the legal right to extend using the statutory procedure. Yes you can try and sell without extending. But you'd have to take a major cut and it limits you to cash buyers only which can make selling more difficult.
                  I think eventually, it is worth doing. You just have to brace yourself to go through the procedure.

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                    #24
                    My offer was turned down by the f/h. He didnt make a counter offer and repeated his original offer would still stand.
                    I really feel I am being stitched up here so I think I’m going to go down the statutory route and hope I can bring the premium down.
                    This is such a nightmare. If I serve S42 and he doesn’t make a counter offer, what am I supposed to do? Go to tribunal and spend even more? Bow and pay an overpriced premium?

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                      #25
                      Thats why I came to the conclusion that I am stuffed and might as well just sell for what I paid for it, great buy for someone that has no intention to extend the lease and just rent it out for 20 years, maybe by then the law will have changed sufficiently, but thats not for me as I would be 90 by then !!!!! Added to that the management fees have just Doubled !!!! Its time to get rid....if I can.
                      But at my buy price it would give a gross return of about 10% to an investor, with no outlay whatsoever, even include all of the furniture, TV beds ready to rent out the next day.

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                        #26
                        Originally posted by lampshade View Post
                        Thats why I came to the conclusion that I am stuffed and might as well just sell for what I paid for it, great buy for someone that has no intention to extend the lease and just rent it out for 20 years, maybe by then the law will have changed sufficiently, but thats not for me as I would be 90 by then !!!!! Added to that the management fees have just Doubled !!!! Its time to get rid....if I can.
                        But at my buy price it would give a gross return of about 10% to an investor, with no outlay whatsoever, even include all of the furniture, TV beds ready to rent out the next day.
                        If that's 10% gross before those management fees and coupled with the knowledge that the flat will most likely depreciate it is sadly not that tempting an investment these days .
                        The thing I am finding is short lease flats in poorer areas are suffering from poor maintenance and skinflint landlords who don't want to pay service charges .
                        Section 42 seems the preferred route for OP.

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                          #27
                          Its interesting you should say that. I am not a landlord but an owner occupier. The flats were built to a very high standard 30 years ago. And in deed for the first 20 years were mainly occupied by owner occupiers. But then a new freeholder bought in and it has gone down hill ever since.
                          maintenance charges started to increase with an equal deterioration in servicing,added to an increase in buy to let, has for sure depreciated the value and desirability for owner occupiers. Added to which most absent landlords are not interested in the up keep of the place in general. But are quite happy to spend on new kitchens and bathrooms.
                          I think they are still pretty undervalued with the positon they occupy in the town, they rent out pretty quickly. SO I will give it a go and see what happens, but take your point

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                            #28
                            Does anyone know if there's anything different/special about requesting a lease extension if the remaining term is less than 40 years? Just looking into it and noticed that the Leasehold Advisory Service's lease extension calculator "cannot do calculations for leases with less than 50 years remaining". Why is that?

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                              #29
                              Perhaps you should make enquiry to LEASE.

                              The Government Policy calls leases above 50 years as "long leases" and leases below 50 years as "short leases". The lease extension calculator works under the software for "long leases" but the calculated cost is only indicative cost.

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                                #30
                                Update for anyone interested, or anyone going through the extension process ...

                                After many weeks of waiting, emails going back and forth between surveyor and F/H solicitor, we had reached a "deal" - or so I thought - at £15k for an additional 90 years on the lease (which would take it to 150+ years), and ground rent £200 (an increase from the current £90 pa).

                                I agreed to that. Not overjoyed by the increased rent but thought was still acceptable.

                                Then the surveyor came back saying the F/H had "renogotiated" - i.e. thought about the whole thing again - and now wants £14k for the extension, £200 g/r but rent doubling every 25 years. I am not happy about that as I think it will put potential buyers off and even possibly be an issue with anyone who needs a mortgage to buy (reminder, am aiming to sell as soon as extension is complete). I would rather pay an additional 1k and not have that doubling clause.

                                How can they agree on a deal then change their mind and ask for more??? The process is dragging, coming up to five months and we don't even have a deal. I thought we were using the statutory route meaning 90 years and nil g/r but apparently this is not the route we have taken. The system is such a rip-off for leaseholders.

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