Leasehold extension quotation - is it reasonable?

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    Leasehold extension quotation - is it reasonable?

    In 2005 I bought a 2 bed flat for £78000. There are now 58 yrs remaining on the lease (ground rent £15 p.a.). I have decided to extend the lease and my freeholder has given me the following options:

    a. A new 100 year lease for a premium of £8500. Ground rent to continue at £15 p.a. to be reviewed every 10 yrs in line with the RPI.

    b. A new 100 year lease for no premium. Ground rent increases to £400 p.a. reviewed every 10 yrs in line with RPI.

    c. A new 100 year lease for a premium of £6000. Ground rent increases to £200 p.a. reviewed every 10 yrs in line with RPI.


    d. 90 year extension to current lease for £9250.

    In all cases the freeholder's legal fees would be £400 + VAT.

    I have commissioned an independent valuation from a chartered surveyor and he has advised me to go ahead with Option D. Given that I intend to sell the flat at some time within the next 8 yrs could I expect to recoup the significant outlay when I sell? I would appreciate the thoughts of any other members before I commit my hard earned cash!

    d is a statutory right. It's much better value than a or c.

    b is:
    i. better in short-term (no premium to pay on completion); but
    ii. probably worse in long-term (as it suffers from the same indexation as do a and c; and it gives only 42yrs. extra- like those two- as against d).

    I'd opt for d. However, await more valuation expert members [esp. sgclacy, if he's around] and their views.
    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
    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).


      Firstly the offer form your freeholder and the range of options shows you are dealing with a reasonable person and clearly amicable egotiation would be the best way forward. If the flat is worth £100 k with a very long lease their offer of £9250 for a lease extentsion under the ACt is reasonable my claculations suggest £10.25k to £12K

      As you are selling in the medium term my advise would differ from Jeffreys because of that

      Option b - is very good...but £400 ground rent is too much on a flat worth probably around £100,000

      A modification to Option C in my view would be preferable if you are selling. Whether the flat has a ground rent of a peppercorn or any rent upto £150 would make no real difference to its asking price. The lease term would still be in the 90's

      Therefore offer an alternaive of a rent of £150 per annum (indexed linked every 10 years with a premium of £7,000 I suspect that would probably be acceptable based on the other options they have offered you

      Let us know how you get on



        Thanks sglacy and jeffrey for your initial responses. I've spent the last hour calling local estate agents (there are currently 8 identical flats for sale in the immediate area) with asking prices ranging from £80k to £95k (v optimistic). The majority seem to have 99 yr leases, indicating that they went for options a to c, and I strongly suspect that most people went for the £400 p.a. option as it is quick and there are no upfront costs. Only 1 flat has a 150 year lease but it is one of the cheapest at £80k!, although it does require modernisation (about £7k).

        Armed with this information I need to decide whether I want my flat to stick out as one of the few with a long lease at peppercorn rent (£15 p.a.). Although option d makes most sense over the long term (20 yrs +) I'd kick myself if my flat didn't command a premium of at least £6k over others when I sell up in 8 yrs or so. Should I dare to be different or follow the crowd?


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