Lease Extension - Increase in Ground Rent

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    Lease Extension - Increase in Ground Rent

    Hi, I'm new to these forums and wonder if anyone could give me some advice.

    I own a flat, in Yorkshire, which was built and the lease started on 1st January 1978, therefore leaving 65 years on my lease. I pay £25.00 per annum ground rent.

    I have recently received a letter from Simarc properties stating that I could enter into a voluntary lease extension with the following terms -
    A new 100 year lease (no premium payable)
    Annual ground rent will increase to £325 per annum
    Rent reviews every 10 years, but will only increase in line with Retail Price Index
    Legal and other fees - £480 incl VAT

    From reading these forums it would appear that obtaining a lease extension would cost several thousands of pounds, which we cannot afford.

    So my question is, given I do not intend to sell my flat for a long time (probably 20yrs or more), are these resonable terms to extend the lease or would I be better leaving the extension given I have no intention of selling the flat, but obviously I do not know what terms I would be offered in the future to extend the lease.

    Many thanks, Paul

    #2
    Unless the flat is worth significantly less than £65,000 the offer appears reasonable.

    Very roughly indeed the premium for a statutory lease extentsion when the term is down to 65 years is around 9-11% of the value of the Flat. The value of the flat being its value if it had a long lease.

    In this case I see the legal and other costs are a modest £480 an application under the Act for a statutory lease extentsion could easily cost £1,500 (under teh Act you have to pay the landlords costs) plus your own costs so the saving here is attractive.

    Whilst you have no intention of selling in the next 20 years you do not know what the future may hold and in this market disposing of a 65 year lease could be difficult and will only become more so as the term gets shorter.

    So provided the deal is as you have stated and the paperwork your solicitor gets reflects exactly the terms outlined then I would suggest you take it

    Comment


      #3
      I can only add to the otherwise excellent summary above that
      1: when taking into account years you intend to live there, you compare the premium you might pay and the choice of paying an additional £300 per annum. If you intend begin resident for 3-5 years it is significantly cheaper.

      2: I would also look at the local level of ground rents for leasehold flats to see if £325 is on the high side as that might be a deterrent to buyers see 3.

      3: On the RPI clause, is that compounded over the 10 years, as that could be a considerable increase and again a deterrent in good time.
      Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

      Comment

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