Extend lease now or wait?

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    Extend lease now or wait?

    We have a short lease (79 years remaining). With all the leasehold reform that is mooted is it best to extend now or wait?
    Thanks to Marina Sergides of Garden Court for this note of an interesting County Court possession claim, defended on public law grounds. Tower Hamlets LBC v Ali, County Court at Clerkenwell & Shoreditch. 21 July 2021 Tower Hamlets (“TH”) brought a claim for possession against Mr Ali after his mother, a secure tenant, died. His […]

    It could take years for any leasehold reform to take effect, so I'd extend now using the statutory route for adding 99 years at nil ground rent.


      The principal area where savings would be made for those with leases under 80 years is the abolition of marriage value that’s has been proposed

      however this would be subject to a very strong challenge by the great estates in London and their attack may be centred around a revision to the deferment rate used currently 5% - there is a very compelling case for lowering this from the rate set in 2006 - Sportelli following the collapse in the risk free rate which since 2006 has fallen from 2.5% to MINUS 0.25% - if the deferment rate fell by just 1.25% to 3.75% then this would compensate for the loss in marriage value - yet would make the formula easier and quicker which meets with the government objective

      Therefore if you are confident that the government will push through its reforms successful without any modifications then it would appear worthwhile waiting

      However most commentators are not that confident and expect there to be a great deal of horse trading and appeals to the European Court of Human Rights and expect the outcome to produce only modest savings - therefore you should press ahead sooner rather than later as the cost of a statutory lease extension once the term has gone below 80 years rises quite sharply

      my own view is that meaningful savings could be had if landlords paid their own fees during lease ext or enfranchisement especially if they acquired their interest post 1993 - this could save a some £3k - £4K to the lessee


        Thanks for the responses. When you put it like that, then yes, I think it might be more prudent to extend now. When the lease extension reforms were first mooted it sounded as though implementation was imminent and now it appears to have fallen by the wayside ..


          The proposals would have enormous negative impact on the value of freeholds and it is expected there will be an enormous pushback from those with influence

          Proposals that ground rents be capped in the enfranchisement / lease extension process is going to be confrontational - suggesting that this needs to happen as lessees were unaware of what they were signing up to or that ground rents should only have been a token sum - are weak arguments as the lessee was represented professionally in the transaction and would have profound impact on other contracts and how the rest of the world views the strength of contract law conducted in this country

          the government appear to using the CMA to deal with the issue of 10. & 15 year doubling ( a possible acknowledgement that capping ground rents through legislation retrospectively is far to challenging ) after those two types of rent have been dealt with what is left ie ground rent above £250 perhaps linked the RPI is hardly the stuff of nightmares to warrant the government to go into battle at the European Court of Human Rights


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