Lease- 53 yrs. unexpired- extend term or enfranchise?

[ddodgeman]

Hi everyone,

I am desperate for some advice. I hope someone can help.

I have recently received a letter from the management co. of the freeholder of my property in reply to my request to find a figure for either extending the lease from 53 years back to 99 or the purchase price to collectively buy the freehold.

I am just starting out on this and my letter was my first exploration into this area, so far I have mentioned buying the freehold with the other 3 tenants in our block of 4 maisonettes & everyone is cautiously interested. 3 tenants including myself are on 53 years and the other is on 99 having recently extended their lease.

The Freeholder dismissed my request as out of the question informing me that all of the tenants had to be involved or I would be unable to proceed with purchasing the lease. They also said that setting up a management co. by tenants never works. I have replied that I am sure you are able to proceed as long as you have 50% of the tenants on board & also that I didn't ask for their opinion.

They have told me in turn I am wrong & should consult a solicitor. They are very unhelpful in general. The properties are all covered by buildings insurance which as tenants we are forced to take out with the freeholders own insurers at an inflated price, their role as freeholder seems to rely soley on making money on lease extensions.
They do not maintain the property at all & there are no communal areas to upkeep anyway. Currently the ground rent is a minimal £16 per year but I am told by a neighbour that they have heard this will increase next year to £100 and the year after to £200.

For these reasons I would idealy like to purchase the freehold and set up a management co. with the other tenants but what I would like is to get a rough idea of the costs. How much would it be, would it be significantly more than extending the lease & how does it affect the cost if only 2 or 3 rather than the full 4 tenants were on board?

I have however received back an offer to extend the leasehold back to 99 years.

I am not quite sure how they have broken this down so I am listing below what they have given me in the hope someone can tell me the total cost:

Premium - £15,000
Ground Rent - £200 pa for 33 years, £400 for 33 years & £800 for the last 33 years.
Costs £600 plus disbursements if any plus VAT for legal fees

Plus £250 for Landlords agents Plus VAT.


I do not understand whether that means the ground rent is to be included in the total figure to pe paid up front or not.

Also I bought the property a little under 2 years ago & had a copy of a document from the last owner quoting a figure of £11,000 for the same extension but from 2-3 years ago.

At the time I was able to negotiate a smaller fee for buying the property instead of getting the previous owner to extend the lease.

Now with the property market the way it is I am saddled with this short lease when I could pick up a freehold property without all this hassle for the same price if not less. oh well, bad timing I guess.

What I would like to know though is does this quote seem reasonable, given that property prices are falling & in light of the earlier quoted figure?

Do I have any way of contesting this if it is indeed on the steep side?

I had the house valued as part of switching mortgages 3 months ago (tricky with only 53 years left) and it was quoted as being worth £140,000.

The property is a 2 bed purpose built 1st floor maisonette with garden and garage.

If any one can has any advice or answers I would be really grateful to hear from you.


Thanks

ddodgeman

[sgclacy]

The offer form your freeholder is surprisingly low

If the flat is worth £140k with its existing short lease I suspect it would be worth around £180k with a new long lease and a peppercorn rent. If that was the case the premium would be of the order of £30k.

Their offer is for £15k plus a new rent of £200 pa annum rising for a 99 year lease this is considerably better for you than applying under the Act. If you were then the premium would be £30k and a peppercorn rent for a new 143 year lease (ie 90 years on top of the remaining term)

I would suggest you accept this offer if the following statements are correct:-

1) Current rent £16 pa
2) Value of the flat if it had a very long lease and negligible rent - £180k
3) Term remaining 53 years

Do take proper professional advice, if you were to apply under the Act it could cost you a great deal more

[ddodgeman]

thanks for the reply

yes the current rent is £16 pa & the remaining lease is 53 years but I would be very surprised if a 99 year lease would bring a value of 180k to the property.

Nextdoor has a 99 year lease & has been on the market a full year at 169k with no takers & has now been withdrawn from sale.

Prices in the street over the last 2 years have varied from 124k to about 160k.

Do you have a rough idea from your experience what the likely cost per tenant of emancipating the lease & purchasing the freehold would be.

I would find this option more attractive than extending the lease if the sums aren't astronomical.

One last point regarding the duration of the lease. Does their offer of "a new 99 year lease" mean that this would replace the existing 53 year lease rather than be added to it?

[jeffrey]

It's better to:
a. buy f/r collectively first; THEN
b. extend leases, unrestricted by '90 yrs.' addition limit.

[ddodgeman]

Thanks Jeffrey,

Before I consider getting professional advice regarding this I really need to get a very rough idea of the cost involved in emancipation as if it is significantly more than extending the lease (which for me is already a lot of money) I will not be able to proceed. I also am not certain that the extension offer is good value in it self.

Any advice would be appreciated

[jeffrey]

There are four flats. Cost of f/r should roughly equal cost of four 90-yr. extensions.