Statutory lease extension process

[dericS]

Further to my recent post regarding extending ones' lease (http://www.landlordzone.co.uk/forums...se-of-67-years), I'd like to request a little help on the following questions please:

Is it possible, via the statutory method, to increase ones' lease by LESS than 90 years? I am asking because, as mentioned previously, the costs of extending BY 90 years are exorbitant, so I am keen on extending only by a period which makes my lease more marketable. In my case, that would mean extending by 33 years in order to shoot the lease back up to 99 years. My freeholder, so far, has been uncommunicative, evasive, difficult to reason with - hence it seems my only option will be the legal route however if that obligates me to extend by 90 years then that obviously comes at a much heftier price tag.

Some individuals really do not deserve to be freeholders. This person has been obstructive regarding this from the start - ignoring enquiries and simply keeping me waiting weeks or months on end for responses to queries. What legal recourse do I have to obligate this person to live up to their responsibilities?

Thanks

[DNM2012]

No, your only statutory right is to the 90 year extension.

If the FH doesn't want to negotiate outside the statutory route, he doesn't have to..

BUT have you tried making an informal offer to the FH that might get his attention.

eg offer £X to extend to 99 years, but suggest an increase in ground rent to a level (that won't put of future buyers) the FH then gets a nice premium now but has increased the future value of the FH.
Mind you if the FH is being uncommunicative now, you might be better following the statutory route.

[dericS]

DNM2012 - once again, thanks for your informative comments.

BUT have you tried making an informal offer to the FH that might get his attention.

eg offer £X to extend to 99 years, but suggest an increase in ground rent to a level (that won't put of future buyers) the FH then gets a nice premium now but has increased the future value of the FH.
Mind you if the FH is being uncommunicative now, you might be better following the statutory route.

Regarding your questions, I have approached the freeholder with a request for his price to extend my lease by 33 years. He (eventually) came back saying that he has been 'advised' that in order to extend a lease, the only route to follow is the statutory route.

Very frustrating dealing with this person. He is miles away so isn't interested in this - if going the statutory route, what options do I have at my disposal to LOWER the cost of it?

Also, just as a side note - in all of this I have scrutinised my lease and found that I have mistakenly been paying double the ground rent all these years. The freeholder has not once brought this to my attention. Indeed i would not have even known had I not been in this position and scrutinised my lease. As some of the over-payments were made over 6 years ago, I am told I may not receive it all back. My question therefore, relates to taxation of these unearned earnings. Is the freeholder obligated to disclose these earnings to the tax man? If he is, then surely he would have known I have been making these overpayments and I can have him for theft. Otherwise, if he hasn't been declaring his earnings, then he has a case to answer to the taxman. Any comments on this? Is my reasoning correct? And further, would he be obliged to pay tax on the lease extension earnings? Would that be taxed at individual tax rate of 40% or corporation tax at 20%?

Cheers

[DNM2012]

I guess you have your answer then, you have to follow the statutory route, accept its going to take a while and cost you. I don't understand why a FH would want to be difficult as at the end of the day you are going to pay them a nice wedge and cover their legal costs.

As far as the overpayments go, I guess the sensible thing to do is alert the FH to the fact and that you now are in credit by X amount covering the next X years ground rent, or asking him to refund you. If you have records proving you paid him of course. Whether you can go back further than 6 years in this case I don't know.

I wouldn't worry about the tax aspect, how can you know someone else's tax details and ultimately its none of your business.

[dericS]

Yes DNM2012, once again, solid advice. The freeholder does not seem to be motivated by money (of course I am sure he would not want to give anything away for less than it's market value either) but these negotiations have been going on for long enough now to see that he is really just too lazy and disinterested to engage.

Thankfully I do have records which show the overpayments.

Ultimately, you are right about the tax issue, it is something of interest though, to know how these earnings are dealt with by the tax man.

[sgclacy]

The difference in the premium for a 99 year lease at a peppercorn (if such a thing was a statutory right, regrettably for you it is not ) and a statutory lease extension is the discounted value of your flats value (based on it value if it has a very long lease) discounted back at 5%. This equates to 0.798% of the flats value

[dericS]

sgclacy thank you very much for your comments. I have to say that what I find really very confusing is:
a) if I extend the lease by 90 that will cost me - ballpark - £35k-odd
b) if I extend the lease by 33 years then I was bargaining on a ballbark figure of around one third of the above cost since I am adding one third of the number of years.

However, having spoken with an estate agent, her valuation was £400000, BUT ONLY with option b lease extension (because nowadays I am told that they cannot sell properties with such short leases as banks will not loan mortgages on these leases).

The interesting thing about my conversation with the estate agent was that she could not guarantee that option a would increase the value of the property by the amount I am spending to increase the lease. Indeed your calculation confirms that a measly 3k will be added to the price.

What I cannot seem to reconcile in my mind is the large disparity in costs between option a and b yet going by the estate agent's advice, option a does not result in a significantly larger return on investment. What am I missing here???

By rights this is slightly off topic from my original question, but any thoughts, comments would be appreciated.

[DNM2012]

What I cannot seem to reconcile in my mind is the large disparity in costs between option a and b yet going by the estate agent's advice, option a does not result in a significantly larger return on investment. What am I missing here???

What you are missing is that your lease is well below the 80 year point where marriage value comes into play. So the biggest part of your cost to extend the lease is the the inclusion of this.
If you had a lease of say 85 years then the difference in cost between extending the lease to 99 years or the statutory 90 years would be much smaller.

Unfortunately the longer you put of extending the lease the more its going to cost you.

The estate agent is correct that you will struggle to find a buyer for a property with such a short lease unless they are a cash buyer in which case they will be looking to pay well below market value anyway.
But don't look to them for advise on leases, they generally don't have a clue.

[sgclacy]

The point to note is that the cost of a lease extension is not proportional. It is not a set amount per annum.

[dericS]

sgclacy - that little nugget of information has enabled me to start making some sense of all of this. Thank you so very much for this. Now I think I may see why they advise the leaseholder to always take the statutory route if possible. Because of the compounding effect of the wasting asset. Additionally, I see that the marriage value actually amounts to my lost 'opportunity cost' of NOT renewing earlier (in essence, my loss). That is a bitter pill to swallow indeed.

Thanks anyway for helping me untangle this.