Negotiating a lease extension

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    #31
    LizLease which route are you following? Formal or informal?

    If you are following the formal route, there are specific timelines that both parties (Freeholder/Leaseholder) must adhere to. If you have instructed a solicitor knowledgeable in the field, he should be aware of this.

    If your freeholder is messing you about, then make sure that your solicitor does not miss the deadline to take it to FTT.

    I agree with your nervousness of doubling GR. At the moment, it is a hot topic and on some of the forums that I am part of, I saw instances of sales falling through because of this (lenders are now vary cautious lending on those terms). Another trick Freeholders try is to switch from doubling GR to RPI. Do not agree to this as this will be another headache.

    If you follow the formal route, there is no room for negotiation (GR is set to peppercorn). The only thing you need to agree is the premium for the extension. If you check the LEASE website, they have transcripts of court rulings on lease extension premium. On the few I open, so that I could be familiar with the legal route process, the court sided by the Lessee not the Freeholder.

    You just need to make sure that your surveyor is able to explain his calculations if it comes to that. Because the freeholder knowns that you are in a rush to extend, they will try all tricks possible to have terms in their favour, not yours. Just be careful before agreeing/signing-off any new terms. Your solicitor should be advising you on all this.

    Hope this helps.

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      #32
      Yes, don't accept the doubling ground rent. While every 25 years is not too onerous it will affect potential sales and restrict mortgage availability .
      Maybe go back and say you want the first offer otherwise you will start the statutory process. That will cost you £4000 + in fees but you will probably win overall...

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        #33
        Babyspice,

        The solicitor is good, very proactive, responding on time and chasing, reputable local firm. The surveyor isn't, always takes ages to respond but now I have paid him and started with him.

        The surveyor said:
        "We are following the statutory route but any variation on the 90 year extension and nil ground rent can be made providing both parties agree to this.

        I feel that by offering a ground rent (which some freeholders like for tax purposes) we can reduce the premium and achieve agreement."

        We started from a very inflated offer by the F/H - according to all calculations - so have now brought this down, but with this new g/r proposal. The surveyor and my solicitor are aware I plan to sell. The F/H isn't, unless of course he communicated that to the F/H solicitor. My solicitor is good advice but he can't decide for me whether I accept certain terms, I get he doesn't want to commit to anything that is a personal opinion.

        The whole process is such a headache and a source of stress ...

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          #34
          Originally posted by Section20z View Post
          Yes, don't accept the doubling ground rent. While every 25 years is not too onerous it will affect potential sales and restrict mortgage availability .
          Maybe go back and say you want the first offer otherwise you will start the statutory process. That will cost you £4000 + in fees but you will probably win overall...
          I suggested that to the surveyor, that we stick to initial deal with slightly higher premium. It's probably going to take him two weeks to get back to us.
          Wow £4k plus fees for Tribunal! I We got the premium down by 4k as it is, so I am not even sure I would benefit from taking it to Court (i.e. Court rules in my favour, I pay 15k but add the 4k fees and I am back to what I would have paid if I hadn't negotiated anyway, plus a 6 months delay).
          I'm never buying a flat again, unless the law changes for good - which might never happen as so many people profit from this leasehold system).

          Comment


            #35
            LizLease i believe that u have instructed an incompetent surveyor. In case my previous post wasn’t clear, setting-up the GR to 0 is not up for discussion neither negotiation. It is a statutory right under the formal route ( that is the all point of using the formal route instead of informal. U are protected by law).

            With regards to costs to take it to FTT if u cannot agree on the premium, since that is not something that I have done myself, I would strongly recommend u give LEASE a call to understand how costs are awarded if u win. My understanding was that each party was responsible for paying their own legal costs.

            before making any final decisions, I would strongly advise u base urself on accurate information and u check all facts with the LEASE team.

            Comment


              #36
              LizLease,

              Your surveyor is correct you can strike an informal deal at any point at any premium / ground rent but if you have started the formal process you need to continue to meet the deadlines for responses otherwise freeholder will know he has you over a barrel.
              My guess of £4000 was a total including yours and freeholders valuation and legal fees.
              Don't bother with LEASE, they are funded by the large freeholder groups and renowned for poor advice. LKP are much more useful and independent.

              Comment


                #37

                LEASE is an executive non-departmental public body, sponsored by the Ministry of Housing, Communities & Local Government. They are not funded by freeholder groups and do not now provide any advice to freeholders paid or free. This applies to individual freeholders as well as others.

                LEASE can be useful as one source of information/advice.

                Comment


                  #38
                  Hmmm, under the watchful scrutiny of minister for housing and sleaze Robert Jenrick ?
                  Is this the same organisation that held seminars for freeholders on how to maximise profits from leases , attended by notorious (Mr double ground rent) freeholder Martin Paine ?

                  Their advice is Free and so is Google.

                  Comment


                    #39
                    Originally posted by lampshade
                    Is it never wise, with something like 70 years remaining on an original 99 year lease to ask for an extension back to 99 years, with appropriate increase and extension to the original GR, which was probably very low in the first place. At least that gets the lease back to mortgageable length??
                    Indeed, it can be a very astute way to hoodwink a greedy freeholder, Especially when selling .
                    In two years time the buyer can expunge the ground rent and add another 90 years for peanuts.

                    Comment


                      #40
                      Might give it a go and see what the FH says !!! Like so many I am only interested in ensuring that my flat is mortgageable, when I want to sell it.
                      Or might as well sell it at a price, less a known cost of extending, start the process so new owner can finish to extension....Does that make sense?

                      Comment


                        #41
                        Originally posted by Section20z View Post

                        Indeed, it can be a very astute way to hoodwink a greedy freeholder, Especially when selling .
                        In two years time the buyer can expunge the ground rent and add another 90 years for peanuts.
                        To extend a lease at 97 years (assuming it was extended back to 99 years and two years have passed) will cost around 0.9% of the value of the flat plus the capitalized value of whatever the ground rents is PLUS professional fees of the lessee and the landlord they alone could be about £4,500 to £5,500 - it will not be peanuts

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                          #42
                          My own flat has a GR of £135pa, which will increase to £200 in 2038 for a further 25 years.. With a final GR of £300 up to end of current 99 year lease.With now 69 years left on the lease, I would like to think that to take the lease back to 99 years might be relatively cheap, and an increase in GR by small amounts would not affect its mortgageability, and of course the Lease would fall into less than the preferred 70 yeras in 30 years time...

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                            #43
                            If the ground rent bill being proposed at present becomes law then in an informal lease extension the ground rent going forward cannot be greater than what is currently set out in the lease - therefore if you are hoping to do a deal outside of the act you may want to do it sooner rather than later

                            PROVIDED the value of the future ground rent and the premium in an informal lease extension are considered carefully before signing up for a new lease there is nothing wrong in looking at informal lease extensions - many commentators have a myopic view and use words like never never ever consider an informal lease extension - it is this simplistic view which I has fuelled this near hysteria over ground rent terms where a ground rent of say £300 per annum linked to the RPI on a flat worth £225k can make the flat un mortgageable - measured debate about disclosure of ground rent terms before entering into a lease is what is required - there is nothing wrong with any ground rent terms PROVIDED the value of that burden is understood before you sign up

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                              #44
                              Originally posted by lampshade View Post
                              My own flat has a GR of £135pa, which will increase to £200 in 2038 for a further 25 years.. With a final GR of £300 up to end of current 99 year lease.With now 69 years left on the lease, I would like to think that to take the lease back to 99 years might be relatively cheap, and an increase in GR by small amounts would not affect its mortgageability, and of course the Lease would fall into less than the preferred 70 yeras in 30 years time...
                              When it reaches£300 it will be a problem. Over £250 and lenders will not touch it

                              Comment


                                #45
                                Originally posted by Dannyhaddon View Post

                                When it reaches£300 it will be a problem. Over £250 and lenders will not touch it
                                well using the BOE inflation calculator the original GR in 1989 of £90 would now be £228, so at £135 it is much lower than the rate of inflation in that period, and it still has 22 years to run at £135 !! So I would have thought that Lenders would have no problem at a GR of £300 in 2060, as it is only then that it will reach that amount.

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