Lease extension- 41yrs. unexpired, £3500 ground rent

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    Lease extension- 41yrs. unexpired, £3500 ground rent

    First I would like to thanks to everyone who provides answers on this very useful forum.

    Anyway my question is regarding extending a lease on 2 bedroom flat in Mayfair London currently worth £600K, I have owned the flat for the past 3 years and ground rent is currently £3500 per year, there is currently 41 years remaining on the lease.
    The flat is part of an estate of 12 flats owned by the free holding company.
    I wrote to the freeholder regarding extending the lease this was the offer in their reply

    1) A new 999 year lease with share o freehold
    2) Ground rent will be a peppercorn per annum
    3) The premium will be £265k

    Is this amount not so far from the usual cost of an extension?
    Do you think I have to strongly negotiate the cost or is a reasonable price?
    Please give me any suggestion.
    Thanks

    #2
    1. L is free to offer whatever he/she wants.
    2. You, however, asked a question which amounts to, "How much of my money do you want?" That's never a good idea.
    3. As you have owned for > 2yrs., you have a statutory right to serve a Notice [under s.42 of 1993 Act]. This leads to a new lease:
    a. extending your existing term by 90yrs; and
    b. reducing ground rent to a peppercorn (i.e. no money rent).
    4. The premium for adding 90yrs. obviously must be less than that for adding 958yrs. (= 999 - 41).
    5. What about the other 11 flats? If their lessees have the same problem, a cost-effective solution is:
    a. to act collectively;
    b. to serve a Notice on L [under s.13 of 1993 Act]; and
    c. to acquire the entire freehold reversion jointly (using a newly-formed company limited by guarantee and owned by all twelve lessees).
    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


      #3
      My suggestion is to check

      1. the property value with a local agent ( Carter Jonas ??) for

      a) current market value selling for 41 years lease + 3500 GR.
      b) current value with 999 year lease and peppercorn GR +SOF

      2. The years remaining on leases of other 11 flats.

      3. The membership and accounts of the current freehold company.

      Comment


        #4
        Gordon999: please explain your point 3.
        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
          OP did ask " Do you think I have to strongly negotiate the cost or is it a reasonable price " ?

          My suggestion on point 3 is to " fully understand the freeholder company situation before entering any negotiation." Its not clear to me if offer of the "Share of freehold" is for share in the same freehold company or for a new company.

          Op has advised the flat has 41 years lease and is worth 600K. But with only 41 years left , the flat is a declining asset and losing capital at 15K per year and a further 3.5K is lost in ground rent. It can only be sold to a cash buyer.

          But paying premium of 265K, will transform the flat to 999years lease and can be offered to a buyer with 75% mortgage.

          Comment


            #6
            Two suerveyors have evalued the property with 40 years remaining 700k.
            The freeholder is a company (owned by all the residents in the 11 flats) and they are offering me the share of freehold, thing that is really rare in Mayfair, for 265k.
            The property is 945 sq ft, what i am asking is if the cost is reasonable or is more convenient to use the property tribunal service.
            The surveyors said that with the 999 years extension (ground rent will be converted to a peppercorn) with the share of freehold the value could reach a bit more than 1 mil.

            Thanks for all yours suggestions.

            Comment


              #7
              Reasonable cost?

              Two suerveyors have evalued my property with 40 years remaining 600k.
              The freeholder is a company (owned by all the residents in the 11 flats) and they are offering me a leasehold 0f 999 plus share of freehold for 265 k.
              The property is 945 sq ft, what i am asking is if the cost is reasonable or is more convenient to use the property tribunal service.
              The surveyors said that with the 999 years extension (ground rent will be converted to a peppercorn, now is 3500 p.a) with the share of freehold the value could reach a bit more than 900k.

              Thanks

              Comment


                #8
                Two separate threads by same member have been merged here. Do not cause problems by starting continuation threads; use the same one.

                Comment


                  #9
                  Clearly you are dealing with an expensive flat and the premium at this length will be in the range of £1/4m to £1/3m

                  You really should be prepared to invest in professional advice from experienced local surveyors, it won't be cheap but at these figures you have no choice.

                  Comment


                    #10
                    Yes. Also note that, for flats, there is no:
                    a. 'high-value' provision corresponding to s.1A of the Leasehold Reform Act 1967 nor
                    b. 'low-rent' provision corresponding to s.4(1) of the Leasehold Reform Act 1967
                    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
                      Thanks,
                      I do not understand what is the meaning at the points a and b of the jeffrey's comment.

                      Thank you

                      Comment


                        #12
                        Simply that houses are governed by different rules from flats. Certain houses' values or ground rents are/were too high for leaseholders to enjoy the extension/enfranchisement rights granted by the 1967 Act; this is never so for flats, no matter how high the property value and/or ground rent.
                        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


                          #13
                          Thank you Jeffrey for your suggestion, but what you said is that I can cot extend the lease? What I would like to know is if the cost 0f 265k for the 999+freehold is reasonable or not.
                          Thank you

                          Comment


                            #14
                            1. Yes, you can extend the lease. You have a statutory right (assertable by Notice of Claim) to do so, as long as you've owned it for at least the last two years: s.42 of 1993 Act.

                            2. No, I do not know if £265 000 is a fair price. It would be for the lease extension (non-statutory) to 999yrs., wouldn't it, not for the freehold.
                            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


                              #15
                              Originally posted by Mayfair View Post
                              Thank you Jeffrey for your suggestion, but what you said is that I can cot extend the lease? What I would like to know is if the cost 0f 265k for the 999+freehold is reasonable or not.
                              Thank you
                              It is in the right sort of terrority but you really must be prepared to spend money on professional valuation advice when dealing with sums of this magnitude.

                              The market in Mayfair as you know is very different from the rest of the country and a short lease is not as problamatic as elsewhere. There are lenders who will lend on such short leases in prime london area. This means that relativity is not quite so great and therefore the cost of a lease extentsion will be less for you than if the flat was of the same value elsewhere in England

                              Comment

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