Calculating informal lease extension

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    Calculating informal lease extension

    Dear all,
    How should extending a lease (currently 49 years inexpired) informally by 10 years be calculated?
    Is there a formula or a calculator or a guide? If not, can we use an estate agent's proposed figure for our informal offer, or should a surveyor do it?
    Thanks in advance

    #2
    There are no calculators to value a 10 year extension because it's pretty much worthless, several online calculators will give you an idea of cost for 90 year extension but there is no requirement for any professional valuation before an informal offer.
    Best provide more detail so someone on the forum can advise further..

    Comment


      #3
      Is this an old residential property or commercial shop property ?

      Extending the lease on residential property does not add any value to the property because mortgage lenders will not offer mortgage loans on leases below 80 years. So you should consider statutory lease extension by 90 years at peppercorn ground rent.

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        #4
        If course as I am sure you know you have no right to make such a claim it has to be by negotiation

        mathematically take what the cost of extending the lease would be at 59 years and comparing it to 49 years

        Comment


          #5
          It is a residential flat, and the price for a 90 years extension is 130k. So you know why i am unkeen on a full extension. 10 extra years would satisfied the banks, I have checked, and most would give a mortgage if there is 30 years left (Barclays even 25), after a mortgage is finished. Any idea what would be a fair price to pay?

          Comment


            #6
            What is the value of the flat if it had a very long lease

            is the ground rent a token sum ?

            Comment


              #7
              950k, the rent is trivial, yes.

              Comment


                #8
                A flat worth £950k with a nominal rent with 49 yrs remaining would cost £133k (according to my model) to extend the lease under the 1993 Act plus professional fees

                at 59 years it would cost £95k (according to my model)

                Therefore in your negotiations you need to be aware that the landlord value in your flat will fall by around. £38k if he were to be amenable to extending the term by just 10 years - he is under no obligation to do so

                with uncertainty as to the future a freeholder may be interested in a deal above and being able to conclude matters quickly may assist in your negotiations - however if you do extend for 10 yrs you would lose your statutory right for 2 years thereafter

                Comment


                  #9
                  This is very helpful, thank you so much!
                  The reason I wanted to extend is to encourage more potential buyers (as I am planning to sell in the next 3 years). Maybe it is best not to do it and the purchaser can serve notice to the freeholder and extend straight away. As you say, if I extend for 10 years next year, then the buyer couldn’t extend straight away, which may be off putting. So complicated!

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