Lease extension - advice needed

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    Lease extension - advice needed

    Hi,

    I'm new on here but just wanted to ask some advice on a lease extension.

    I own a flat that has 73 years left to run on a 99 year lease and I am currently trying to negotiate a premium for an extension with the landlord's property management agent.

    The flat's current value is about £125,000. I'm not sure how much it would increase with a longer lease.

    After asking for the extension, this is what they have sent through:

    "Lease extended to 12/2105

    Premium of £9,000

    Ground rent at £250/£500/£1000, in lieu of the existing £30/£60/£100, and £2000 for a new twenty-three year period 12/2082 to 12/2105, being the remainder of the new term

    Freeholder's fixed costs in this matter to be met, fixed at £990.50, to include fees, legal, disbursements and VAT as applicable, subject to the normal time in matters of this nature being spent."

    From what I can understand my statutory rights are for a 90 year extension and peppercorn ground rent. This quotes for a 23 year extension on the lease which I think is pretty damn expensive!

    I've already had a desktop valuation done as we were originally quoted £15,000 for the above increase! The desktop valuation came in at between 5-8k for a 90 year @ peppercorn.

    As we want to sell the flat I was going to suggest to the management company that we could maybe come to some sort of agreement on extending the lease to just 99 years. What do you think would be a realistic figure/price to quote/suggest to them?

    Thanks

    #2
    For how long have you owned leasehold? Have you served a Notice of Claim under s.42 of 1993 Act?
    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
      Originally posted by jeffrey View Post
      For how long have you owned leasehold? Have you served a Notice of Claim under s.42 of 1993 Act?
      We've had the leasehold for just over three years. I'd rather try and negotiate first before issuing notice of claim - although I have no problem with doing this should I have to.

      Comment


        #4
        I put your figures, (and some I have estimated) into an online calculator:

        http://www.tenancy-agreements.co.uk/lease.php

        and it came up with this:

        Lease Extension Calculator
        Unexpired lease: 73 years
        Lease extension: 26 years (90 years)
        Total length of new lease: 99 years
        Ground rent per annum: £ 30 (a peppercorn rent)
        Present market value with existing lease: £ 125000
        Future market value with extended lease: £ 134000
        Yield: 6 % (calculate the yield from 2� per cent. Consolidated Stock, about 4.54%)
        Landlord's share of marriage value: 50% (50 per cent or greater)

        Term: £492.89
        Reversion at 73 years: £1,904.48
        Diminution in the landlord's interest: £1,978.75
        Marriage value: £7,021.25

        Possible premium: £5,489.38
        To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

        Comment


          #5
          Thanks for the replies. I was thinking of offering about 4/5k premium with ground rent of £200 for an increase to 99 years? Does this sound reasonable?

          Comment


            #6
            Three parts to the cost of the premium:-

            1) Capitalisation of teh rent at 7% = £730

            2) Discounted value of teh reversion based on £134k = £3,800

            3) Marriage value

            Relativity at 73 years = 93% possibly

            £134,000 X (100% - 93%) £9,380
            Less £730
            Less £3800

            = £4850 X 50% = £2,425

            Premium for 1 new 162 year lease nil ground rent = £730+£3800+£2,425 = £6,955 say £7,000 at the very best from the Landlords perspective that could be achieved at teh LVT would be £7,750

            Offer them £8k and each party bears their own costs if they wont budge offer to take on a smallish ground rent. If they still wont budge then a formal Section 42 Notice needs to be served

            Comment

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