Lease extension - calculator query

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    Lease extension - calculator query

    I am in the early stages of buying a leasehold flat for £327,500. The lease has 79.5 years remaining and we have agreed that the vendor will serve a s42 notice and assign the benefit to me.

    I am trying to assess how much I should budget for the premium payable for the lease extension. The ground rent is £100 for the first 33 years, £200 for the next 33 years and £400 for the final 33 years.

    I have used sgclacy's threads (eg http://www.landlordzone.co.uk/forums...ad.php?t=11083) to estimate the premium payable and these are around the £10,500 mark, assuming that the flat is worth £370,000 following the lease extension and my calculations are correct - the £370,000 figure is my guess as to what it may be worth, based on other properties in the area.

    However, when using other online calculators (such as http://www.tenancy-agreements.co.uk/lease.php) the premium is much higher.

    I appreciate that the negotiation of a premium price is clearly dependent on the parties involved, but it would be useful to understand whether, if people have used sgclacy's formula in practice, this has been an accurate assessment of the premium payable or whether it is more likely a starting point for tenants for inclusion in the s42 notice?

    I am planning to use a surveyor to assess the amount of premium to include in the notice, but, anticipating that the conveyance will be lengthy, would like to know how much to set aside for the premium for the time being (excluding all solicitor and surveyor costs).

    Many thanks
    PH

    #2
    I used sgclacy's formula to check the premium I had to pay to extend the lease of a flat I bought last year and for which the previous owner had served a section 42 notice prior to completion.

    I initially took a surveyor who suggested a premium that was incorrect as he messed up the calculation and I spotted the error. I got the vendor to insert the figure suggested by my surveyor in the section 42 notice and the freeholder came back with a premium that was almost twice as much. I looked into my surveyor's calculations in detail and realised that he had messed them up. To verify the accuracy of the freeholder's premium, I used sgclacy's formula which was spot on (give or take £1k), which gave me some comfort that the freeholder was not ripping me off. I asked another surveyor to assess the premium (a friend of mine) and she advised roughly the same figure as the freeholder's.

    So in my experience, sgclacy's formula is fairly accurate.

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