lease extension

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    lease extension

    I’m buying a ground floor maisonette with front and rear gardens in North London, it has a 52 year lease with £12 pa ground rent agreed price 150k (needs doing up), with a healthy lease the property is worth in the region of 200k (fair / good condition), the freeholder is asking for 20k plus costs to extend the lease to 125 years with 250 pa ground rent.

    if we were to go to a tribunal after 2 years of ownership a friend thinks the lease extension should be in the region of 8 ½ k and the agent thinks 12k.

    Could anyone confirm the figure?

    Also

    We are going to rent the flat out, does this affect our right to renew?

    Can we extend at anytime after 2 years i.e. when we only have 10 or 20 years left on lease (I appreciate that this will increase the cost on a pro rata basis)?

    Can we request a total of 99 years?

    Any idea of the costs we would incur if we were to go to a tribunal?

    Any held greatly appreciated

    Thanks.

    #2
    1. If V has owned flat for >2yrs., arrange for V to serve statutory extension Notice now - before exchange of contracts - and to assign its benefit to you on completion. That way, you won't need to wait two more years.
    2. Subletting does not affect T's right to 90-yr. extension lease.
    3. The premium (price) forextension will inexorably rise, year by year, as unexpired term ebbs away.
    4. You could request a 99 yr. total term (ie a 47-yr. extension), on a non-statutory basis; but why? Getting a 90-yr. extension (so you'd have 142 yrs.) is surely better value for money.
    5. Costs of LVT vary- at least £1000 but maybe more. At least you can't be made to pay L's costs, no matter who wins.
    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
      Based on the ground rent being £12 pa annum with 52 years remaining and for teh flat to be worth around £200k with a long lease I would calculate the cost of a lease extentsion to be as follows:-

      Step 1, capitilisation of ground rent at 7.5% . Take the rent and multiply by 15 = £180

      Step 2. Discount the value of the reversion of the property using the deferment rate of 5% (Cadogan V Sportilli) This equates to £32,711

      Step 3. Calculate what the value of the property is with a long lease (you advise £200k) and deduct what the flat would be worth with its current lease in a "no act world". I would suggest a relativity of 75% You would need to trawl through various LVT cases looking for similar types of property in London but I think 75% is good enough for this quick back of an envelope valuation.

      Take the difference between the two figures ie £200k less £150k you get £50k. Then deduct the figures in step 1 & 2 of £0.18k and £32.7K to get £17.2k.

      Take 50% of this figure (the marriage value) to arrive at £8.6k

      The cost of the lease extentsion is the sum of these three steps ie £0.18k +£32.7k and £8.6K = £41.4k

      The landlord is seeking £20k plus a revised ground rent. Go for it !!!!

      Comment


        #4
        thanks for the info

        Comment

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