Lease extension - informal negotiations

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    Lease extension - informal negotiations

    Hi all, I've been reading through the posts and there is a wealth of great info here. I wonder if anyone would be kind enough to comment on the below?

    Quick summary of my position:

    Bought flat 2 years ago.
    Lease has 61 years left. Current ground rent £20 pa, rising to £25 for last 33 years.
    Freeholder quote for extension when buying was £11,500, to only extend back to 99 years, ground rent £250 pa, rising by £100 every 25 years. £600 admin fee.

    I estimate flat to be worth approx 80-85K without extension, 90-95K with.

    My estimate of lease extension cost from the calculations is in the region of 8 to 9K, and as I have now owned it for 2 years obviously can now go to LVT.

    Given that they previously quoted much higher (and less favourable terms) I suspect that any current quote will be even higher. I would however prefer to not go through the hassle and costs of LVT if possible.

    I was considering writing to the freeholder, pointing out I could now serve notice, and any extension would be for an additional 90 years, peppercorn rent etc, and asking for a quote.

    I am prepared to negotiate and pay a bit of ground rent (say up to £50 a year) and happy to extend only up to 99 years, if I can get them to knock the cost right down to say 7 or 8K.
    This would seem fair – they get better terms (at least some ground rent!) and about the same premium the LVT would award, I save myself the costs of going to LVT.

    My query is, when I write to them should I make a proposal of terms and costs, or just ask for a quote and then negotiate from there? Would any indication that I was prepared to pay an amount for less favourable terms count against me if we could not agree and I had to then serve notice and go to LVT?

    Also, am I being optimistic in thinking that this may work with the freeholder or are they likely to come up with a ridiculous quote and just leave it to LVT to sort out? Do they see LVT as a hassle or given I pay their costs is it not a problem?

    Thanks in advance for any advice.

    #2
    An update on this, I wrote to the freeholder for a current quote, they have come back with:

    Premium: £11,750
    Lease: 99 years from now
    Ground rent: £250, doubling every 20 years
    Costs: Admin fees of £850

    Can anyone advise if this is reasonable? I'm not liking the ground rent but don't plan to hang onto the property for more than a few years.

    Comment


      #3
      Ground rent should be peppercorn I think (i.e. essentially zero)

      Doubling every 20 years is utterly rediculous.

      Comment


        #4
        Originally posted by dawny10 View Post
        An update on this, I wrote to the freeholder for a current quote, they have come back with:

        Premium: £11,750
        Lease: 99 years from now
        Ground rent: £250, doubling every 20 years
        Costs: Admin fees of £850

        Can anyone advise if this is reasonable? I'm not liking the ground rent but don't plan to hang onto the property for more than a few years.
        L can ask for any amount of loopy figures. You have no control over them unless and until you serve a statutory Notice of Claim.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


          #5
          Originally posted by dawny10 View Post
          An update on this, I wrote to the freeholder for a current quote, they have come back with:

          Premium: £11,750
          Lease: 99 years from now
          Ground rent: £250, doubling every 20 years
          Costs: Admin fees of £850

          Can anyone advise if this is reasonable? I'm not liking the ground rent but don't plan to hang onto the property for more than a few years.
          Any thoughts on whether this is a reasonable premium price (ignoring the ground rent for the moment)?

          Lease has 60 years left. Current ground rent £20 pa, rising to £25 for last 33 years. Value of flat is 80-85K without extension, 90-95K with.

          My thoughts are that unless the premium quoted is very reasonable, to get my own valuation and then use that and the 'threat' of a formal notice and peppercorn rent to negotiate a premium and a lower (though not necessarily peppercorn) ground rent - they do all their legal stuff inhouse and if we go the notice route I'm worried that they will charge a lot of unnessary hours (I've seen a couple of LVT cases where they have been accused of this).

          Comment


            #6
            The premium should be around £9500 for a 90 extentsion to the remaining term with the rent falling to a peppercorn

            THe landlords costs you are obliged to pay if you serve a section 42 notice are as follows:-

            Valuation fee - £500 max

            Landlords legal costs of checking the validity of the notice - £250 max

            Landlords costs of drafting the deed of variation/deed of surrender and regrant - £750 max

            Costs spent arguing or negotiating with you are not recoverable from you. If it goes to the LVT you are not liable for their costs but neither are they liable for yours.

            Comment


              #7
              Thanks for that - I hadn't realised the freeholders costs were capped, that is good to know.

              Comment


                #8
                Originally posted by dawny10 View Post
                Thanks for that - I hadn't realised the freeholders costs were capped, that is good to know.
                They're not capped. They have to be reasonable, however, and LVT can adjudge what counts as 'reasonable'.
                JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                4. *- Contact info: click on my name (blue-highlight link).

                Comment


                  #9
                  Sounds to me like you have exhausted the "informal" route and the freeholder is not offering you a good deal frankly. Time to get some professional advice and go down the notice-serving route.

                  Although you say you have owned the flat for 2 years, you can only serve the S42 notice if the Land Registry shows you have owned it for 2 years. Just double check that online - some conveyancing solicitors can be slow to sort that post-sale.

                  If you want a local solicitor specialist in the area of lease extension (many will say they can do it but costly mistakes by local generalist lawyers are not unknown), you can find one on the Association of Leasehold Enfranchisement Practitioners (www.alep.org.uk) web site.

                  As Jeffrey says, the LVT should not come into it unless it gets really contentious and that is rare. If it does happen though, you will really need a specialist valuer like him and a solicitor on your side.
                  Leasehold Solutions Ltd
                  Freeing tenants from the slavery of lease
                  andy@leasehold{remove this bit}solutions.com
                  0808 1311 109 -
                  http://www.leaseholdsolutions.com

                  Comment


                    #10
                    Originally posted by andyz1 View Post
                    Although you say you have owned the flat for 2 years, you can only serve the S42 notice if the Land Registry shows you have owned it for 2 years.
                    No. The two years starts from the purchase completion date, not the land registration date.
                    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                    4. *- Contact info: click on my name (blue-highlight link).

                    Comment


                      #11
                      Suggestion - short cut - Print out sgclacy's valuation and send it to your landlord and ask him to agree those figures. mark your letter "without prejudice". Invariably that member of the forum is spot on the money!

                      Comment

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