Lease extention advice

[Freddy06@tiscali.co.uk]

Hello

First time buyer
Really need your advise I have just purchased a flat from a family friend and the lease has 58 years to run.
The Value of the property was £125000 and I brought it for £100000 cash
thinking I could extend the lease when I purchased the property.

Now am I right in thinking that It will be 2 years before I can extend the lease If this is correct do you think I got a bargain and what sort of money would It take to extend the lease ?

Many Thanks

[Poppy]

There is a two year qualifying period to extend one's lease under the Leasehold Reform Act 1993.

However, there is no harm in contacting the freeholder as soon as you like to see if they'll respond by stating their conditions and premium.

As to the cost, that is a matter purely for yourself and the freeholder to negotiate.

[jeffrey]

There is a two year qualifying period to extend one's lease under the Leasehold Reform Act 1993.

However, there is no harm in contacting the freeholder as soon as you like to see if they'll respond by stating their conditions and premium.

As to the cost, that is a matter purely for yourself and the freeholder to negotiate.

I agree, but:
i. you could nevertheless negotiate/complete an extension now- no need to wait two years unless L and you can't agree terms;
ii. did Transferor (the family friend) serve a Notice of Claim before selling to you? The Notice could now be assigned to you, so you'd be credited with his years for statutory purposes; and
iii. how many other flats in block? If all/most lessees are in the same position, they could collectively purchase freehold, for which the two-year rule doesn't apply, then re-grant all leases for 999yrs free of charge (except legal fees).

[WakeyWakey]

ii. did Transferor (the family friend) serve a Notice of Claim before selling to you? The Notice could now be assigned to you, so you'd be credited with his years for statutory purposes;

Can the benefit of a Notice be assigned after the completion of a transfer?

[jeffrey]

Yes, but Deed of Assignment needs careful wording to show that it is executed in accordance with sale/purchase Contract and takes effect from completion of sale/purchase.

[Corinne Tuplin]

Dear Freddy,

Unfortunately, it appears it is too late for a Deed of Assignment to be prepared in this matter so as to entitle you to proceed with a statutory leasehold extension immediately.

This is because you say that transfer from the previous owners to yourself has already occurred.

Please let me know (by email) if you would like me to undertake a Leasehold Valuation Report showing approximately how much you should pay in two years time.

Kind regards,

Yours sincerely,


CORINNE TUPLIN
SENIOR SOLICITOR
PRO-LEAGLE
corinne@proleagle.com
www.proleagle.com

[davidcross]

I to have almost an identical suitation and with a lease of 54 years. It would be helpful if some one could give an indication as to what cost.
I have been quoted 39950 +1700 costs which seems abit steep but I do not really know.
Help please.

[sgclacy]

Some thought on the premium

The first thing to do is to find what the value would be of the flat with a 90 years being added to the remaining term and then take its current value. The difference is refered to as marriage value. Obviously you want to know know and not wait days for a formal valuation so for London properties there is a very crude rule of thumb which suggests that a flat declines by 1% for every year below 80yrs. So with a 58 year lease the diminution in value compared to the flat having a very long lease is around 22%. So if its worth £125k with a very long lease then with 58 yrs in London it might be worth around £97.5K ( £125k X (100-22)%) . So the marriage value is therefore £27.5K. Outside of London the feeling is more towards 0.7% per year below 80years

Next you have to capitalise the ground rent, unless there is an iminent rent rise multiply the ground rent by 13. Say the rent was £10 this of course gives £130

Finally you have to work out the value of the freeholder receiving the reversion in 58 years time. Following the recent case of Cadogan- V- Sportilli the rate used will probably be 5% unless you can argue against that. The right to receive the reversion would be 1/17 of the full market value of the flat. Therefore on a flat worth £125k this would equate to £7.35K.

Now take that capitilised ground rent and reversion add them together and you get £7350 plus £150 = £7500. Take that figure away from the marriage value of £27,500 and you get £20,000. Divided that by 2 and you pay the freeholder £10,000 plus the £7,500 = £17,500

I have done a spreadsheet and if you want e-mail me at stephen@clacy.com and I will forward it to you.