Lease Extension - Flats

[DMC102]

Hi all - looking for a bit of advice on something about which I think we have a few knowledgeable members.

My sister needs to extend the leases on a couple of flats she owns, and has been in touch with the landlord. He has given her a price for each extension - the flats are basically identical and in the same block, and the price is the same for both. In addition, he expects my sister to pay his legal costs, which I suppose is the usual way these things go.

My questions are:

• Is there any formula / rule of thumb to determine how reasonable the landlord's price is?

• Would my sister need to engage a solicitor, or could she just tell the landlord to go ahead if she's happy with the prices?

• Is there any possibility that the proposed changes to leasehold property laws I keep hearing about will affect my sister's position? In other words, is there a strong argument either for getting on with it ASAP or for waiting for the law to change?

Any pointers gratefully received.

[Boss13]

There will be many more skilled than me in this area, however, I can provide some guidance having gone through this a couple of times.

• Is there any formula / rule of thumb to determine how reasonable the landlord's price is?

In theory yes, however it is often best to agree with the landlord a reasonable rate and move forward. See link: https://www.lease-advice.org/calculator/
You can of course try to negotiate the price, especially if doing two. However, you may find little flex as they will not want to lower prices for other future leaseholders.

• Would my sister need to engage a solicitor, or could she just tell the landlord to go ahead if she's happy with the prices?

Definitely 100% engage a lawyer. There are intricacies to this process and getting the legals right and registered correctly on Land Registry is crucial. Not to scare you, but I had one where LR queried some wording in the extension, which meant we had to start again effectively, in total it took over two years...they are not all like that, but they are usually fiddly in some respect. By the way it is normal for leaseholder to pay freehodler legal costs.

• Is there any possibility that the proposed changes to leasehold property laws I keep hearing about will affect my sister's position? In other words, is there a strong argument either for getting on with it ASAP or for waiting for the law to change?

Yes I believe so, however I would suggest this depends on how long your sister's lease currently is. If it is getting close to 80 years, then get it done or at least start to...as below that the price is usually much higher (marriage value).

[wileeeeeey]

My limited understanding is there are two ways to extend the lease which is top it back up to what it was originally (99, 125, 999 years) or a statutory 90 year extension.

Once a lease goes below 80 years there is a premium to pay so you pay for the extension plus the premium. You generally need to own a property for two years before you can request to extend. If buying a property the current owner can get the price and then assign the right to the new owner bypassing the two year wait.

You can either ask the freeholder for a quote or you can employ your own solicitor and surveyor and submit the price given via a section 42. I think a few people find this easier.

[MrSmith]

Yes I believe so, however I would suggest this depends on how long your sister's lease currently is. If it is getting close to 80 years, then get it done or at least start to...as below that the price is usually much higher (marriage value).

Though marriage value is supposedly going to be abolished, the bill has had it’s second reading and hopefully will make it onto the statute books late summer.
I have to extend my lease to sell in January, I’d be a fool to start the process now as hopefully I will be able to save thousands by waiting for the new laws and get a 999 year lease not 99. It will also be a far simpler process and the cost for the extension be calculated online and not some big number pulled out of thin air by the freeholder.
Not a fan of Gove but glad to see this initiative finally make it to the Lords and all being well into the statute books fairly soon.

[DMC102]

Thanks very much for the helpful responses.

[arthurDALEY]

Some good advice thanks,we looked at renewing our lease 2yrs ago and although we only have 48 yrs left we were quoted 50k for 99yrs
Whether this would be cheaper with the new system ?
Hopefully the new way will be a lot simpler, the surveyor turned out to be a family member who charged £800 for the privilege and didnt even come and view as he knew where we lived and what they were like inside !!

[MrSmith]

Some good advice thanks,we looked at renewing our lease 2yrs ago and although we only have 48 yrs left we were quoted 50k for 99yrs
Whether this would be cheaper with the new system ?
Hopefully the new way will be a lot simpler, the surveyor turned out to be a family member who charged £800 for the privilege and didnt even come and view as he knew where we lived and what they were like inside !!

Well marriage value would have been a significant chunk of that, like me you will have to wait and see but all being well it will be cheaper and longer.

[mmgg1988]

I have just exchanged contracts on a flat and when they made their offer, they wanted me to extend the lease (as you have to own the leasehold for 2 years before you can apply for an extension) prior to completion.

I therefore researched it, the solicitor I was using for the sale quoted £500 for the work on that aspect. There is an online lease calculator which gave an estimate of cost. You have to serve a section 42 notice on the freeholder proposing a price to pay for the extension (in my case, the figure agreed generally tied with that on the online calculator I was told) and you also pay the freeholders legal and valuation costs on top. You may have to pay 10% of the offer price as a deposit after serving notice. They have 2 months to respond with their future and then you agree a figure and pay the costs.

In the end however, due to upcoming changes likely in leasehold law and the fact my lease was over 88 years, it was not felt worthwhile to extend the lease from my or the buyers perspective so we did not go ahead with it therefore I cannot offer any real life experience.

[chaplad]

We pay an annual leasehold "Groundrent" of £18 per annum consisiting of 2 x £9. We have 143 years left of a 200 lease. We own our house (no mortgage) on the land.

We are currently trying to engage our leaseholder to hopefully buy the freehold. She is dragging her heels (I dont know why really) other than she has always refused to sell the leaseholds she owns.

We have written to her formally via a soliciter and she has replied she is very busy and will respond in due course.

Will the new legislation help us in our situation does anyone know please, IE are we better waiting until it becomes law or trying to carry on as we are doing?

Ive put the details into one of the simple online value calculators and according to that the value of the leasehold is currently around £500. The value seems to go up to approx £2k when it gets to around 120 years left on the lease and I would think obviously more as the years get less.

Obviously our soliciters fees will be on top and maybe our "landlords" legal fees as well, but I am not sure about that part of the costs TBH?

Does anyone have any experience of this or can anyone offer any advice please?