Minimum Leasehold extension

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    Minimum Leasehold extension

    Hi there,

    is there a minimum amount of time that a leasehold extension should be for?

    Somehow I had it in mind it was 90yrs on top of the remaining period.

    I have just been quoted £9.7k to extend 67yrs to 125yrs on a flat that is worth £70k

    I queried whether it the term should be 67+90 years but was told no by the freeholder. Thought it would be easier asking here as the freeholder has 10 day SLA for everything and a 6 week cut off to accept the quotation or I have to pay for the quotation fee again.


    Many thanks!
    ILD

    #2
    The statutory leasehold extension is 90 years on top of 67 years to 157 years at peppercorn ground rent. There is a free guide to statutory lease extension to download from www.lease-advice.org

    Comment


      #3
      Unless the current ground rent is around £300 per annum or soon will be the figure of £9,700 does seem very high

      Comment


        #4
        Many thanks! They are insistent their offer of 125 years is correct and “invite” me to “counter offer”.

        I’ll probably just get a solicitor who has expertise on leasehold involved as I have no idea what I am doing.

        Comment


          #5
          You should study free guide to statutory lease extension :

          https://www.lease-advice.org/advice-...tting-started/

          Comment


            #6
            This guide to cost of statutory lease extension shows an example for lease extension at 68 Years to 158 years at peppercorn ground rent at £10,700 which is about 7% of the £150K of the property.

            https://www.lease-advice.org/advice-...ion-valuation/

            So you could make a counter offer at £4800 ( or less ) for statutory lease extension to 157 years at peppercorn ( Nil ) ground rent. .

            Comment


              #7
              I would advise against making an offer for a statutory 90 year extension without speaking to a specialist (not a solicitor) as at that point you will become liable for freeholders costs.
              By all means make an informal offer for any length at any rent but first speak to Linz at homehold.org who are the experts in the field.

              Comment


                #8
                A reasonable estimate of teh premium could be achieved as follows

                1) Take the ground rent and multiply by 20 ( if it rises fairly soon, take that higher figure

                2) Take the value of the property and defer the reversion at 3.75% ( not the usual 5%) for 67 years and this mean dividing the value of the flat (assuming it had a long lease) by 11.78 . You advise it is £70,000 so £70,000 / 11.78 = £5,941

                Premium sum of the two

                If you defer the reversion at 3.75% rather than 5% almost all marriage value disappears and is an easy crude and fairly accurate rule of thumb

                You can see where the government may go with marriage value - lower the deferment rate (which needs to be reviewed anyway as the long term risk-free rate has collapsed) and marriage value with all the complexities of looking at graphs, postulating what happens in a no act world all disappears - you then have an easy quick formula and the premium is about the same - but the lessee would save significant legal and valuation fees

                Comment


                  #9
                  Originally posted by sgclacy View Post
                  2) Take the value of the property and defer the reversion at 3.75% ( not the usual 5%) for 67 years and this mean dividing the value of the flat (assuming it had a long lease) by 11.78 . You advise it is £70,000 so £70,000 / 11.78 = £5,941

                  Premium sum of the two

                  If you defer the reversion at 3.75% rather than 5% almost all marriage value disappears and is an easy crude and fairly accurate rule of thumb
                  Hi, my math is not working today Could you please explain how did you arrive at 11.78? Thank you

                  Comment

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