£30,000 for a Lease Extension HELP!!

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    £30,000 for a Lease Extension HELP!!

    I have been living in my one bedroom flat for 12 years now. It’s a ground floor maisonette in Harrow, Middlesex, Greater London and is a stone’s throw away from the rail & tube station. I need to relocate due to work commitments so want to sell, but have just found out it could cost be a massive £30,000 to extend the lease by 90 years.

    I am obviously shocked at this amount and was wondering whether any of you leasehold experts out there could advise me. The Lease was granted in March 1979 so the remaining period is 66 years and I pay ground rent £50 once a year. The ground rent remains at £50 throughout the remaining term.

    A similar property nearby was recently marketed at £205,000 with a full lease.
    I have tried to use the formulas found on this forum, 1. Capitalisation of ground rent, 2. Deferred value of the reversion and 3) Calculation of marriage value etc but its all too much for me!
    Can somebody please tell me what is a realistic figure I should be expected to pay?

    Thanks for your time in advance

    Tina

    #2
    I have a number of 'buy to let' flats, that are under the 80 years, and so will cost a fair bit to extend.

    I have resolved not to pay for any more lease extensions for the following reasons:

    1.) The flats were bought to provide me income, and the existing leases will see me out.
    2.) The freeholders are asking over the odds for the lease extensions.
    3.) If I make my flats more valuable by getting a lease extension, any time I have to sell one, I will have to pay CGT at 38% on any increase in value, even due to inflation.
    4.) It is the cost of 'marriage value' which is shared between the freeholder and lessee that makes lease extensions under 80 years so expensive. At the last election, the LibDems promised to do away with this. If a future government sees a LibDem-Labour coalition, I would guess this may become law. Then, I would feel rather foolish to have paid thousands for what I can then have free of charge.

    Tina, could you let your flat until such time as no. 4 happens?

    Comment


      #3
      JKO makes a fair point that you can simply see these as an asset that produces income and that the return of the sale on a short lease is still sufficient compared to the original price and passage of time.

      I suggest that you get a local chartered surveyor ( one used to be a member until the incident of which we should not speak : ) ) to advise you on the value for sale as is compared to the £215 on a longer lease.

      You might consider that instead of the 90 years plus 66 and a peppercorn rent that you extend it to at least 99 years or 125 years and a current ground rent, with reviews, perhaps in the region of say £200/250, which will significantly reduce the premium.
      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


        #4
        Originally posted by Tinaswn View Post
        I have been living in my one bedroom flat for 12 years now. It’s a ground floor maisonette in Harrow, Middlesex, Greater London and is a stone’s throw away from the rail & tube station. I need to relocate due to work commitments so want to sell, but have just found out it could cost be a massive £30,000 to extend the lease by 90 years.

        I am obviously shocked at this amount and was wondering whether any of you leasehold experts out there could advise me. The Lease was granted in March 1979 so the remaining period is 66 years and I pay ground rent £50 once a year. The ground rent remains at £50 throughout the remaining term.

        A similar property nearby was recently marketed at £205,000 with a full lease.
        I have tried to use the formulas found on this forum, 1. Capitalisation of ground rent, 2. Deferred value of the reversion and 3) Calculation of marriage value etc but its all too much for me!
        Can somebody please tell me what is a realistic figure I should be expected to pay?


        Thanks for your time in advance

        Tina
        A method of calculating the rough cost of the lease extension was posted by our expert sgclacy in LZforum thread no. 11080 .

        I calculated the total cost to be about 15950 pds.
        (A=750 , B= 8190 , C= 7010 )

        Comment


          #5
          Thank you for your posts!

          I found thread number 11080 and yes, according to this the lease extension should be £15950. This is almost half of what the landlord is asking!

          I did some more hunting on this website and found out that there are a number of debates on what relativity % should be used.

          I looked up the Beckett and Kay graph 2011 and it seems that the landlord may have applied relativity according to Savills 1992. I redid sgclacys calculation using a relativity of 22% and the lease extension came to £31490!!


          My question is therefore, who decides which line on the graph to use? I want to try and negociate something with the landlord out of tribunal so it would be helpful to get the figures right before I start something. There also seems to be some debates on changes that took place in 2011 especially effecting leases under 70 years.

          So does anyone know if I should use the Savills or LTV line on the graph?
          http://www.beckettandkay.co.uk/pdfs/...ity-feb-11.pdf

          My lease has 66 years remaining, £50 ground rent, inner London location and value is £205000. There is so much difference between £15950 & £30000 I really need some help on where to start.

          Thanks again
          Tina

          Comment


            #6
            Originally posted by Tinaswn View Post
            Thank you for your posts!

            I found thread number 11080 and yes, according to this the lease extension should be £15950. This is almost half of what the landlord is asking!

            I did some more hunting on this website and found out that there are a number of debates on what relativity % should be used.

            I looked up the Beckett and Kay graph 2011 and it seems that the landlord may have applied relativity according to Savills 1992. I redid sgclacys calculation using a relativity of 22% and the lease extension came to £31490!!


            My question is therefore, who decides which line on the graph to use? I want to try and negociate something with the landlord out of tribunal so it would be helpful to get the figures right before I start something. There also seems to be some debates on changes that took place in 2011 especially effecting leases under 70 years.

            So does anyone know if I should use the Savills or LTV line on the graph?
            http://www.beckettandkay.co.uk/pdfs/...ity-feb-11.pdf

            My lease has 66 years remaining, £50 ground rent, inner London location and value is £205000. There is so much difference between £15950 & £30000 I really need some help on where to start.

            Thanks again
            Tina
            Have you done any research on your freehold company ? Any past record of making extortionate demands on lessees or having been previously discussed in LZforums or in LVT judgements ?

            1. You can download a free guide on lease extension procedure and valuation of the cost for lease extension from www.lease-advice.org.

            2. The market value of 205K is your figure and the LL may be using a different higher property value. You may need to consult a chartered surveyor CS working daily near to your flat such as the one at Stephen Woodwards ( at Harrow on the Hill). The CS can assess the current market value for your flat.

            3. You probably need help from a L&T solicitor experienced in lease extensions . Try asking for a quote from legalmaze and other solicitor firms .

            Comment


              #7
              Hello Gordon

              Its a one bed maisonette so only one more flat upstairs.

              The market value is from 2 local estate agents that I invited estimates from so its should be ok.

              So do you beleive the relativity is 89% LVT line is correct? I can see where the landlord has got his £30,000 figure as he has used the Savills 1992 line with relativity of 78%.

              I just need to know if he is correct in using this line?

              Thanks

              Comment


                #8
                Originally posted by Tinaswn View Post
                Hello Gordon

                Its a one bed maisonette so only one more flat upstairs.

                The market value is from 2 local estate agents that I invited estimates from so its should be ok.

                So do you beleive the relativity is 89% LVT line is correct? I can see where the landlord has got his £30,000 figure as he has used the Savills 1992 line with relativity of 78%.

                I just need to know if he is correct in using this line?

                Thanks
                See earlier postings in LZforum thread no. 22799

                Comment


                  #9
                  Your figure of the open market value is based on the lease being a length that does alter the value.

                  The expert part is first establishing the value of the flat at it's current term, based on local comparables.
                  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


                    #10
                    Hi - I am a leasehold enfranchisement solicitor at JPC Law in London and have read this post with interest. You are entitled to a 90 year lease extension in addition to the unexpired term and your ground rent will become nil. My advice would be to take professional valuation advice and not to rely solely on calculators which are no substitute to an inspection or desktop valuation. Make sure you also engage the services of an experienced solicitor who knows what they are doing - there are many loopholes and far too often I come across invalid notices which cost a tenant a considerable amount.

                    Comment

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