Negotiating a lease extension

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  • sgclacy
    replied
    That would probably be deemed acceptable by the Tribunal, but that is at the very top end of the acceptable range - as you lease was below 70 years there would be some time spent on calculating and arriving at the marriage value

    There is a lot to be said for having prescribed rates and the issue of marriage value will I am sure be abolished as it does create an opportunity for those valuing to spend time seeking comparisons and thinking about what happens in a no act world - all done of course at your expense

    However, it seems very likely that the deferment rate would be lowered from say 5% to 4% which would make the premium about the same, BUT the valuation would be so much easier.

    I say this as a freeholder, I do think the freeholder should bear their own costs on a lease extension particularly if the interest was acquired post 1993 when enfranchisement and compulsory lease extensions was known at the time of purchase - a landlord should not need counselling to get over the trauma of receiving a Section 13/42 notice - it most cases it provides a good profit

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  • LizLease
    replied
    No, the surveyor fee was in addition, £1020!

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  • sgclacy
    replied
    Does that include the surveyor fee ?

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  • LizLease
    replied
    Thank you both

    sgclacy, if you are talking about the "deed of surrender and regrant of lease", that is a 10 page document and as far as I am ware, there are no specific issues or complications with it. It's a flat in a 30 year-old small block of flats and there are no odd clauses or anything.

    When I asked for a "breakdown" from the FH solicitor, all I got was 3 lines on an email with "section 60 a/b/c" and 3 different amounts. Which added up to 2700.

    How much does it cost to go to FTT though? I wouldn't do it now as I can't delay the process any further, would need to be addressed after if I have the energy.

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  • sgclacy
    replied
    If you were to challenge the costs afterwards, almost certainly it would be dealt with as a paper review and is not as daunting as it might seem . The Tribunal generally think that around £350 plus VAT for dealing with the Section 42 Notice of claim and circa £1000 plus vat for the deed of surrender and re-grant is reasonable PROVIDED there are no complications in the title or if there are overriding leases/ head leases in place

    There are numerous Tribunal decisions on Section 60 costs which can be viewed online so you can get a feel as to what is reasonable. Without knowing if there are any particular issues with the ownership of your leasehold interest the fee of £2,700 does seem excessive

    Please do let us know how you get on

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  • Section20z
    replied
    Agreed the system is broken but just be glad you got a resolution.
    Whilst the fees are a bit high , it will only cause you more months of stress if you fight it at a tribunal.
    In these cases it's always best to use a specialist and not a solicitor who has no interest in getting a good deal for the leaseholder.
    Best put it behind you now you've got a decent deal.

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  • LizLease
    replied
    really? I believe we used the statutory route. This whole process has been a nightmare - I had been warned i am not one to always moan and complain about procedures, society etc. In fact I am a very quiet and docile citizen but I think this whole lease system in the UK is outrageous. It is outdated, a legacy of the feudal system, totally unregulated and open to abuse (no legal frame to set premium and fees, open to “negotiations”). It benefits a handful and racketeers little people like me who save their hard earned cash to pay for the luxury of those leases.

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  • Section20z
    replied
    Originally posted by LizLease View Post
    which I have to pay as we all know - are £2.7K!
    Using the informal route you do not "have to" pay the freeholders legal fees.

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  • LizLease
    replied
    We eventually settled on zero GR and £16.5K premium. Not ideal but the worse thing is, the LH solicitor fees - which I have to pay as we all know - are £2.7K! I really feel I have been totally stitched up. With all costs included, we are talking 22-23K. Will start another thread about fees.

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  • Dannyhaddon
    replied
    Originally posted by lampshade View Post

    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.
    Yes maybe your right, but as of today. Any ground rent over 250 a year and lenders aren't willing to lend as it means the freeholder can take the property if the ground rent isn't paid.

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  • lampshade
    replied
    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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  • Dannyhaddon
    replied
    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

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  • sgclacy
    replied
    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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  • lampshade
    replied
    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...

    Leave a comment:


  • sgclacy
    replied
    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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