High cost of lease renewal

[ram]

Ram, I don't know what to say, you keep saying to look at it as rental which it isn't just a rental, your making me feel that I should just take whatever price my FH has given me without questioning it?

You are at liberty to negotiate with the freeholder and the FTT regarging the cost of a lease extention.
I mearly point out the workings of a lease.

A lease is a long tem rental for you to use the "Demised" areas for the rental rate of , lets say £ 100,000 for 90 years.
Why do you have to ask for permission to change anything in your flat, from stuctural, ( which of course is essential the freeholder is involved ) to changing the bathroom, water pipes, electric, moving bathrooms etc, is because you do not own the flat, the freeholder owns the flat, the rooms "demised to you are via your lease ".

The freeholder gives you the right to use those rooms exculsively for the term of the lease.
When the lease runs out, you pack your bags and leave.
You do not get paid for your flat when you leave at the expiration of the lease, because it's the lease you bought, not the flat, and when lease runs out, you have no claim on the flat ( because it's a long term rental, and not a purchace of property )

Any rental over 21 years has to be in the form of a lease.
You bought a lease, you did not but the flat. You can only use the flat for the length of time the lease allows you to.

If you wish to disprove the above fact, try. But you have a long term rental.
That is what a lease is. With certain internal obligations on maintenence and decor.

Once you realise that a lease is a long term rental, then £ 17000 is a good deal to extend the ( rental ) lease.

[MrSoffit]

Sars you are right to be wary. Whilst negotiating beware of the freeholder offering cheaper deals outside the statutory route but with punitive ground rent increases.

And no surprise there. Never done an extension so all theoretical to me.

Sars is looking to sell flat as soon as possible, has 68 years left and says statutory route will cost £19129 for extra 99 years with peppercorn rent. Alternative informal offer of extra 57 years with £300 GR for £2.5K less.

Extending leases informally is a strategic game for the freeholder who relies on the short term needs of the extender --- all that extra ground rent adds to marriage value down the line and makes freehold a nicer sell-on --- peppercorn rent, not so nice.

On face value, Sars can get his wanted sale with a 125 year lease and saves £2.5K and leaves the next lessee(s) to face the consequences (as they have nothing to benchmark the higher GR against and wont face marriage value themselves for another 45 years). Is the informal route a good deal value-wise? For Sars, I'd say yes. Avoids any legal arguments and sars don't suffer no way I can see.

On the other hand, for the Op the informal deal on the table is £4K more than a theoretical calculation done by his solicitor (am expert leasehold surveyor?) or the LAS widget that doesn't as I understand it include legal or conveyancing fees, just the premium? The tribunal might come up with a higher premium, mightn't it?

Know an (ex)neighbour who bought their flat for £99950 just before the crash, extended informally (added 99 years to remaining term but with hiking GR) for £14K after the crash and sold one year later for £75K.

Does extending the lease guarantee the "healed" relativity will be realised on open fluctuating market?

[andybenw]

Missed that bit of Sars post.

An onerous ground rent schedule is highly likely to be picked up by a solicitor nowadays.

So Sars, you may be better going down the statutory route as simply applying will be good enough for a buyer. Bear in mind if you are selling and negotiating informally the price may change at a 'crunch point'.

Also bear in mind given the length of your lease, it is advantageous for the freeholder if you extend as late as possible due to marriage value. Expect protracted negotiations if you proceed with the informal route.

[sars]

So Sars, you may be better going down the statutory route as simply applying will be good enough for a buyer. Bear in mind if you are selling and negotiating informally the price may change at a 'crunch point'.


do you know how this works if I apply then do I pay the bill or the buyer??

thanks again guys

[sars]

Ram, I think you are missing my point?? I haven't asked for workings out on what it costs for long lease on my property, so your explanations are wasted as they are not significant to my question, But thanks for your time.

[andybenw]

So Sars, you may be better going down the statutory route as simply applying will be good enough for a buyer. Bear in mind if you are selling and negotiating informally the price may change at a 'crunch point'.


do you know how this works if I apply then do I pay the bill or the buyer??

thanks again guys

If you apply for a statutory lease extension the process shifts to the buyer, but it means a buyer does not have to wait two years. Obviously the cost of such an extension will then be factored into their offer.

[andybenw]

You are at liberty to negotiate with the freeholder and the FTT regarging the cost of a lease extention.
I mearly point out the workings of a lease.

A lease is a long tem rental for you to use the "Demised" areas for the rental rate of , lets say £ 100,000 for 90 years.
Why do you have to ask for permission to change anything in your flat, from stuctural, ( which of course is essential the freeholder is involved ) to changing the bathroom, water pipes, electric, moving bathrooms etc, is because you do not own the flat, the freeholder owns the flat, the rooms "demised to you are via your lease ".

The freeholder gives you the right to use those rooms exculsively for the term of the lease.
When the lease runs out, you pack your bags and leave.
You do not get paid for your flat when you leave at the expiration of the lease, because it's the lease you bought, not the flat, and when lease runs out, you have no claim on the flat ( because it's a long term rental, and not a purchace of property )

Any rental over 21 years has to be in the form of a lease.
You bought a lease, you did not but the flat. You can only use the flat for the length of time the lease allows you to.

If you wish to disprove the above fact, try. But you have a long term rental.
That is what a lease is. With certain internal obligations on maintenence and decor.

Once you realise that a lease is a long term rental, then £ 17000 is a good deal to extend the ( rental ) lease.

The trouble with your 'long term rent model' does not factor in the right to extend with peppercorn ground rent. Once ground rent is peppercorn you effectively 'own' the property albeit with a raft of covenants between yourself and the landowner. There is no rent to pay, and further extensions are extremely cheap.

Personally I think informal extensions should be made illegal, with all extensions to be peppercorn. Also new leases to be at peppercorn rent. I think we would then find far more 'shared freeholds' being created moving us effectively towards a condominium/tenement approach that the introduction of commonhold failed to do.

[ram]

The trouble with your 'long term rent model' does not factor in the right to extend with peppercorn ground rent. Once ground rent is peppercorn you effectively 'own' the property albeit with a raft of covenants between yourself and the landowner. There is no rent to pay, and further extensions are extremely cheap.

[ RaM ]
The trouble with " peppercorn rent", is that the feeholder then has no income with which to carryout his duties.
Companies house 20 to £ 40
Litigation if someone does not pay their service charges £ 2000 to £ 15000 solicitors / court fees, which perrercorn rent will not give the freeholder the funds to take such action.
Here we have peppercorn rent and it costs more in fees, time, expences in normal duties than the freeholder receives in rent !

Personally I think informal extensions should be made illegal, with all extensions to be peppercorn. Also new leases to be at peppercorn rent. I think we would then find far more 'shared freeholds' being created moving us effectively towards a condominium/tenement approach that the introduction of commonhold failed to do.

[RaM]
When all leasholders have a share in the freehold company, they will refuse to sanction forfiture action, due to the cost, therefore no one will ever pay their service charges as freeholder has no money to take action.
Peppercorn rent can be only £ 10 per year, and for 4 flats does not even cover the time and costs to send ( by post ) the annual returns ( £ 40 )

So please don't advocate peppercorn rents.

[andybenw]

Reducing rent to peppercorn is the prime mover in taking value out of the freehold and into the leasehold.

Extending you are likely to get either, peppercorn down the statutory route, or onerous rents down the informal. Anyone going the informal route is just stacking up a huge bill for someone else 20 years down the line and providing a huge payout for the freeholder. So yes, indeed I do advocate peppercorn rents.

It's generally accepted that the best thing to do on enfranchising is to reduce rent to peppercorn and extend all leases to 999 years.

And peppercorn rent can be absolutely zero. I have no idea where you have grabbed your figure of £10 out of the air from.

[ram]

And peppercorn rent can be absolutely zero. I have no idea where you have grabbed your figure of £10 out of the air from.

We have £ 3 ground rent and 999 year leases, and only the freeholder can ask for forfieture on service charges, etc ( that's the only way we can cet our costs back - in the lease )

We cannot forfeit anyone, we cannot sue for none payment of service charges, as the freeholder has no money. The directors refuse to lend money to the freeholder, even though they are the representatives of the freeholder, because they don't have the money and fear of losing any court proceeding, so to advocate a peppercorn rent is financial suicide for the freeholder, which then extends to the leaseholders if most don't pay the service charges, the place falls into disrepair, and your arguments are a sure fire way to destroy the infrastructure of a building, where the lease then becomes invalid via no action by directors, and no cash either in the service charge account or the freeholders bank.

Then someone has to go to the FTT to appoint a manager, which then alienates that leaseholder, and that leaseholder is then seen as scum.

Yes, push for no ground rent, it's the bees knees of destruction.

[andybenw]

Well, you certainly are bitter about your own situation. But I don't think you should use your own particular situation where no-one pays their service charges and extrapolate it to all shared freeholds. Mine works reasonably well now, but I don't take that to mean all shared freeholds are rosy.

I'm pretty sure that in the majority of shared freeholds leaseholders pay their service charges, unlike your experiences.

(And bear in mind, not all shared freeholds are owned by companies. There are many small conversions owned directly on the title deed.)

[lampshade]

recent example of that, where i only want to extend the lease from existing 72 years, £120pa gr back to original 99 year, but FH has offered 125 years but new gr of £300pa effective immediate, with large rises built in. Even then FH charge for extension is 45% higher than any calculators suggest it should be