Is it necessary to issue 90 year lease extension?

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    Is it necessary to issue 90 year lease extension?

    I have a freehold. There are two leasehold flats. I own one of the flat. The other flat is owned by someone else on a 68 year lease.

    The other flat has been up for sale and is undergoing a sale.

    I don't mind extending the lease, but only want to extend to 99+ years. The money I have been offered for another 90+ years with no ground rent is lousy (and they keep trying to haggle), even though house prices have gone up a lot, so in theory should the value of any lease extension.

    Can I only extend to 99 years only? This would suit me and probably the seller, as his outlay would be lower.

    My partner got a valuation, but I don't have much faith, as we have often been asked to pay more when we want to extend the lease....

    #2
    if it is a statutory claim under the 1993 Act then you have to grant a 90 year lease with a peppercorn rent. If you cannot agree a premium than the first tier tribunal can on application determine the the terms.

    If it is not then it is up to you what terms you accept, bering in mind that if your terms are unacceptable as long as the have owned the flat for two years they can make the above stat app, and the terms will be determined by others if neither of you are realistic.
    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.

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      #3
      If you want to grant only a new 99 year lease then try offering a deal with a higher ground rent and a much lower premium . Make it clear that it is either this or a statutory claim.

      If they are selling it may be an option they will take up which will benefit you and the current lessee

      Comment


        #4
        Remember if the statutory demand comes in the new lease will become 158 years (current 68 plus 90 on top) at zero ground rent. But you will receive marriage value i.e. half the difference of the flat's current value and what it will be worth with a 158 year lease. You will have no right to say no to this demand.

        You can currently offer them a new 99yr lease as per the suggestion in post #3 - you could also say £1000 ground rent per annum, to double every five years, and charge very little or no premium for this lease extension. This will make the lease reversion extremely expensive if the new buyer doesn't extend again quickly enough, and this means you may end up with a very valuable freehold.

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          #5
          matt as I have covered before a £1000 GR will not compare to even central London markets so something at the local level is more appropriate.

          it does however make sense for an extension to 99 or 105, for a modest premium, is more affordable and a buyer happy to pay that plus say £350/£400 a year for 3/4 years before moving and it is still cheaper than the premium on a statutory 90 + term.
          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


            #6
            Sorry, this was merely an example... £1000 would probably be hard to swallow but you get the gist of it

            Comment


              #7
              As already covered, if they pursue the statutory route the leaseholder is entitled to a 90 year extension and to a peppercorn ground rent. You will of course be compensated accordingly.

              In order to enact this right, they will need to serve you with a Section 42 notice. At that stage, they become liable for your reasonable costs, including your solicitor’s and surveyor’s fees.

              Given you’ve already had a valuation (hope you didn’t put your hand in your pocket to fund this, because you needn’t have), you may be able to apply some pressure.

              Offer the extension to 99 years, with a modern ground rent, on the basis of the premium your valuer has said you can demand for the statutory extension, with the caveat that the leaseholder pays your legal costs incurred in granting the new lease. In this way, you retain some value in your reversionary interest, and the leasholder doesn’t face mounting professional fees and a lengthy statutory process that might delay their sale.

              Everyone is a winner!

              Comment

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