Lease Extension formal or Informal

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Lease Extension formal or Informal

    Hi
    We have been sent the below informal lease extension offer on our flat which has 63 years left on the original lease, and is worth appox £140,000 at the moment.
    As this is our first lease extension and after burning our brains out with all the info on the net plus getting a lease extension valuation we do not know which way to go as there seems to nightmare stories about RPI linked ground rent.


    - Extension to 2142 (New term of 125 years)
    - Premium of £17,451
    - Ground Rent of £320 linked to RPI every 10 years
    - Discounted Legal fees of £850+VAT (fixed price) + £250+VAT Valuation Fee.

    We thought it would be best to go down the the formal route, but were shocked at the £23,085 lease extension valuation and have also been advised that the true cost could be more like £27,000 plus expenses after negotiations.

    Our solicitor has also warned us that it could be hard to sell the flat in the future if the ground rent is linked to RPI as it may be hard to get a mortgage on it?

    Any advice or comments most appreciated.

    #2
    A ground rent that is linked to the RPI seeks to keep its purchasing power constant over the term of the lease. It would seem a reasonable demand.

    None of us would take a salaried position on a fixed salary for some 25/33 years without any adjustment to the salary to reflect the negative effects of inflation. None of us would let a flat out on an a tenancy initially at the market rate and undertake never to increase the rent regardless of inflation

    Rents that double every 33/25 years try to compensate for inflation but are of course a wild guess as to what inflation may be. If we were to have deflation or very low inflation rates these clauses could make the ground rent onerous

    The Council of Mortgage lenders requires that the rent is readily determinable and reasonable. A rent linked the the RPI is of course readily determinable and the idea that the rent keeps its purchasing power constant would be considered reasonable. Therefore a rent linked to the RPI should not pose a problem

    Comment


      #3
      What is the current ground rent?

      Your figures for a statutory lease extension seem on the high side, have you had a proper valuation done?
      If your current GR is £250 you are looking at up to around £19k plus costs

      Comment


        #4
        There is a free guide to example calculation of premium to pay for statutory 90 years lease extension which can be downloaded from www.lease-advice.org

        http://www.lease-advice.org/advice-g...ion-valuation/

        The first example is given for a flat with 68 years lease valued at £150K and £165K after lease extension : calculated premium = £10,763

        The second example is for flat at 50 years lease valued at £97K and £165K after lease extension : calculated premium = £27,409 .

        The difference in cost is roughly £17K between 68 years and 50 years, so we can estimate the cost at 63 years will be about £5K higher than at 68 years.

        So the cost for statutory 90 years lease extension at peppercorn ground rent should be around £16K.

        Comment


          #5
          Originally posted by Gordon999 View Post
          There is a free guide to example calculation of premium to pay for statutory 90 years lease extension which can be downloaded from www.lease-advice.org

          http://www.lease-advice.org/advice-g...ion-valuation/

          The first example is given for a flat with 68 years lease valued at £150K and £165K after lease extension : calculated premium = £10,763

          The second example is for flat at 50 years lease valued at £97K and £165K after lease extension : calculated premium = £27,409 .

          The difference in cost is roughly £17K between 68 years and 50 years, so we can estimate the cost at 63 years will be about £5K higher than at 68 years.

          So the cost for statutory 90 years lease extension at peppercorn ground rent should be around £16K.
          I dont find the lease calculator to be accurate, it has not been updated for the changes in valuation that have come about in the last few years. More accurate is myleasehold's leasehold calculator. It will give u a range and towards the higher end is about right. This particular firm acts pretty much entirely for leaseholders and hence its calculator is a bit optimistic

          http://www.myleasehold.co.uk/lease-extension-calculator

          Comment

          Latest Activity

          Collapse

          • Reply to Residents Management Company Building insurance
            by GordonClose
            Thank you for the replies. The RMC (not an RTM) was setup by the builders when the property was built so has always been in existence (since 1980). The insurance has always been arranged by the Freeholder and paid for by the RMC. The lease states that the RMC will keep the buildings insured as directed...
            17-08-2022, 12:12 PM
          • Residents Management Company Building insurance
            by GordonClose
            I am a Director of an RMC and the Freeholder insists it is their right to arrange the insurance. Have I the same right as an RTM to take over the arrangement of insurance?
            15-08-2022, 14:26 PM
          • Sale of Freehold - Tax to Pay
            by divadee
            Hi, I hope I can write this in a clear way that makes sense!

            We bought a leaseholders flat in 2016, the next year we bought the limited company that held the freehold. This was done as no other leaseholder were interested in buying the freehold a few months prior to us buying our leasehold...
            16-08-2022, 16:37 PM
          • Reply to Sale of Freehold - Tax to Pay
            by Gordon999
            The company accounts shows the share capital at £2, it was holding the property on behalf of you ( beneficiary ) .

            Since you have received £14K and £12K from disposal = £26K , your capital gain will be £26K - £18K = £8K .

            You are entitle to the annual cgt allowance...
            17-08-2022, 10:50 AM
          • Right To Pass and Re-Pass (Not to Obstruct)
            by LondonCalling
            I am the owner/occupier of a leasehold first floor flat in a converted property consisting of two flats. The freeholder owns and is the occupier of the ground floor leasehold flat. There is a passageway/right of way from the road along the side of the building to my ground floor front door entrance....
            16-08-2022, 16:26 PM
          • Reply to Right To Pass and Re-Pass (Not to Obstruct)
            by Lawcruncher
            Absolutely not! Both the right and covenant are clear. Ask the freeholder why he considers he should not be bound by the terms of the lease. If he insists he is not bound, suggest that in that case you are not bound by the terms of your lease either....
            17-08-2022, 09:57 AM
          • Reply to Sale of Freehold - Tax to Pay
            by divadee
            Sydaton,

            They are the accountants that the managing agents use. We have literally left it all up to them and have been hands off (unless there were issues with stuff that need authorising by us). Our managing agents are also company secretaries for the Ltd company that we own.
            ...
            17-08-2022, 09:01 AM
          • Reply to Sale of Freehold - Tax to Pay
            by Sydaton
            divadee, you mention the company accountant in the first post but then mention that you were relying on your managing agents. Are they one and the same?

            Where did the £14k paid for the lease extension go?
            17-08-2022, 08:41 AM
          • Reply to Ground rent arrears from executor
            by Martin448A
            I did look at buying the freehold a few years ago but there solicitor quotes up to £4000 costs and I believe that was more then the value of the lease itself !
            17-08-2022, 06:10 AM
          • Ground rent arrears from executor
            by Martin448A
            Hi,
            received a letter out the blue from someone claiming to be the executor of the deceased freeholders of my leasehold maisonette. Have never receive ground rent request for payment for any of the years I have owned the property or has the other maisonette in my building.
            They are now requesting...
            16-08-2022, 00:30 AM
          Working...
          X