[Finance] Advice on extending a Lease

birthofanorange · Apr 19, 2022

Would anyone be able to offer-up some simple pointers as to the costs/difficulties etc. involved in obtaining an extension to the Lease on my flat?

I purchase my flat approx 16 years ago, on a new 99 year Lease - current value of flat approx £200K.

Although I have no plans to move/sell in the immediate future, I guess that could possibly change in time.

I'm aware that I have 84 years left on it, and that the cut-off point for higher costs is around the 80 year mark, so would like some advice on extending it, before that point is reached.

I have zero experience of this, so any advice would be gratefully received.

Justice · Apr 19, 2022

How many flats in the block/conversion?

Westdene Seagull · Apr 19, 2022

birthofanorange said:
Would anyone be able to offer-up some simple pointers as to the costs/difficulties etc. involved in obtaining an extension to the Lease on my flat?

I purchase my flat approx 16 years ago, on a new 99 year Lease - current value of flat approx £200K.

Although I have no plans to move/sell in the immediate future, I guess that could possibly change in time.

I'm aware that I have 84 years left on it, and that the cut-off point for higher costs is around the 80 year mark, so would like some advice on extending it, before that point is reached.

I have zero experience of this, so any advice would be gratefully received.

I can only give you my experience of extending rental flats but hopefully it will be of use.

The price really depends upon the greed of the freeholder - there is no real market value. That said, if you're serious then it's worth employing a solicitor - they can often get a far cheap price than you could. There is an appeals system when the adjudicator sets the price - only used it once but even then my solicitor dealt with it.

I'm not sure I'd worry at 84 years left - easy to get a mortgage on that. As an example, I'm currently selling a flat with less than 70 years on it and it has gone to a bidding war. At the moment you wouldn't make your money back if the freeholder is greedy. That said, the less left on the lease the more the freeholder tries to get out of you. I am assuming you live in B&H - the market may well be different elsewhere.

birthofanorange · Apr 19, 2022

Justice said:
How many flats in the block/conversion?

Just the 4, and I did enquire about the possibility of buying the Freehold, but we need more than 50% of the other owners to be interested, but they don't appear to be.

kevo · Apr 19, 2022

About a year ago, I could well have come on here asking the same question.

It is all a bit of a nightmare. Your first point of call is the Leasehold Advisory Service website.

You can get a rough idea about how much it will cost by using a lease extension calculator. But you need to add legal costs and your landlord's legal costs on top of that.

As you say, you need to renew it before the 80-year mark as otherwise 'marriage value' kicks in and you will pay thousands more.

Having said that, leasehold reforms are meant to be going through Parliament soon that should make the process cheaper and easier. So it may be worth sitting tight for now.

I didn't have to go through it in the end, as my landlord sold up and I purchased a share of the freehold with the other people in my block (about half the price of extending the lease). It also shared the burden of dealing with solicitors etc. That might be an option for you if other tenants are in the same boat.

birthofanorange · Apr 19, 2022

Westdene Seagull said:
I can only give you my experience of extending rental flats but hopefully it will be of use.

The price really depends upon the greed of the freeholder - there is no real market value. That said, if you're serious then it's worth employing a solicitor - they can often get a far cheap price than you could. There is an appeals system when the adjudicator sets the price - only used it once but even then my solicitor dealt with it.

I'm not sure I'd worry at 84 years left - easy to get a mortgage on that. As an example, I'm currently selling a flat with less than 70 years on it and it has gone to a bidding war. At the moment you wouldn't make your money back if the freeholder is greedy. That said, the less left on the lease the more the freeholder tries to get out of you. I am assuming you live in B&H - the market may well be different elsewhere.

Yes, easy at 84 years, but we may not decide to move or sell for another 10 years or more, which surely would drastically reduce the value of the flat, should we decide to at that point?

Yes, I'm in BN3.

Westdene Seagull · Apr 19, 2022

birthofanorange said:
Yes, easy at 84 years, but we may not decide to move or sell for another 10 years or more, which surely would drastically reduce the value of the flat, should we decide to at that point?

Yes, I'm in BN3.

And there in lies the challenge - if you paid now but decided to move in say 3 years time you'd be quids down. Sell in say ten years time and you'll probably make your money back ( or at least sell quicker ). Personally, if it were my home as opposed to an invest like I have, I'd look at what [MENTION=11720]kevo[/MENTION] has mentioned which is buying the freehold.

birthofanorange · Apr 19, 2022

Westdene Seagull said:
And there in lies the challenge - if you paid now but decided to move in say 3 years time you'd be quids down. Sell in say ten years time and you'll probably make your money back ( or at least sell quicker ). Personally, if it were my home as opposed to an invest like I have, I'd look at what [MENTION=11720]kevo[/MENTION] has mentioned which is buying the freehold.

Yes, but sadly I need more than 50% (that effectively means 2 of the other 3 flats) to agree to it, and they're not fussed.

DJ NOBO · Apr 19, 2022

birthofanorange said:
Yes, easy at 84 years, but we may not decide to move or sell for another 10 years or more, which surely would drastically reduce the value of the flat, should we decide to at that point?

Yes, I'm in BN3.

You don’t need to concern yourself with this for a long long time.
Even with 74 years left you still wouldn’t have anything to worry about for quite a long time.
And it wouldn’t drastically reduce the value anyway.
Relax and forget about it.

birthofanorange · Apr 19, 2022

DJ NOBO said:
You don’t need to concern yourself with this for a long long time.
Even with 74 years left you still wouldn’t have anything to worry about for quite a long time.
And it wouldn’t drastically reduce the value anyway.
Relax and forget about it.

Any idea by what kind of percentage the value might fall?

Tom Hark Preston Park · Apr 19, 2022

birthofanorange said:
Would anyone be able to offer-up some simple pointers as to the costs/difficulties etc. involved in obtaining an extension to the Lease on my flat?

I purchase my flat approx 16 years ago, on a new 99 year Lease - current value of flat approx £200K.

Although I have no plans to move/sell in the immediate future, I guess that could possibly change in time.

I'm aware that I have 84 years left on it, and that the cut-off point for higher costs is around the 80 year mark, so would like some advice on extending it, before that point is reached.

I have zero experience of this, so any advice would be gratefully received.

Our block of 6 flats is going through this process at the moment. One of the leaseholders was worried that there was 'only' 75 years remaining on their lease, the rest of us checked and the remaining term was the same. So we're getting them extended - by 999 years! Our three solicitors quotes were all in range £400 - £500 per flat, which seems eminently reasonable. Each of the 6 flats has an equal share in the freehold, no idea if this makes a difference or not. But on the face of it seems pretty straightforward and probably worth doing, then you can forget about it forevermore

scooter1 · Apr 19, 2022

Tom Hark said:
Our block of 6 flats is going through this process at the moment. One of the leaseholders was worried that there was 'only' 75 years remaining on their lease, the rest of us checked and the remaining term was the same. So we're getting them extended - by 999 years! Our three solicitors quotes were all in range £400 - £500 per flat, which seems eminently reasonable. Each of the 6 flats has an equal share in the freehold, no idea if this makes a difference or not. But on the face of it seems pretty straightforward and probably worth doing, then you can forget about it forevermore

If each of the 6 flats has an equal share of the freehold then you shouldn’t need a lease, as you are a freeholder - that’s my understanding. It sounds like you’re all possibly just paying admin costs for something irrelevant

DJ NOBO · Apr 19, 2022

birthofanorange said:
Any idea by what kind of percentage the value might fall?

Well if it came down to it you’d just have to get the lease extended before you sold if there was only a short amount left.
If there were , say , 72 years or more left it would be the buyers problem.
If the lease had, say, 68 years left, you’d probably pay a contribution to what it would cost to extend the lease in full.

Tom Hark Preston Park · Apr 19, 2022

scooter1 said:
If each of the 6 flats has an equal share of the freehold then you shouldn’t need a lease, as you are a freeholder - that’s my understanding. It sounds like you’re all possibly just paying admin costs for something irrelevant

That was my initial understanding also. But turns out each flat has an individual lease and leaseholder, irrespective of who owns the freehold. I'll dig out the wording from the solicitor if I can find the email explaining it

*EDIT* How it was explained to us by solicitor:

'With respect to their leases, each freeholder is also a tenant and it is in that capacity that they execute the lease. I appreciate that can be confusing as many tenants (sometimes called "leaseholders" to avoid the confusion) are also landlords of their leasehold flats with their own tenants.'

birthofanorange · Apr 19, 2022

scooter1 said:
If each of the 6 flats has an equal share of the freehold then you shouldn’t need a lease, as you are a freeholder - that’s my understanding. It sounds like you’re all possibly just paying admin costs for something irrelevant

Yes, you can extend your own Lease if you have a share of the Freehold....I think.

scooter1 · Apr 19, 2022

Tom Hark said:
That was my initial understanding also. But turns out each flat has an individual lease and leaseholder, irrespective of who owns the freehold. I'll dig out the wording from the solicitor if I can find the email explaining it

*EDIT* How it was explained to us by solicitor:

'With respect to their leases, each freeholder is also a tenant and it is in that capacity that they execute the lease. I appreciate that can be confusing as many tenants (sometimes called "leaseholders" to avoid the confusion) are also landlords of their leasehold flats with their own tenants.'

Fair enough. Seems unnecessarily complicated, but hey ho……..

kevo · Apr 20, 2022

Tom Hark said:
Our block of 6 flats is going through this process at the moment. One of the leaseholders was worried that there was 'only' 75 years remaining on their lease, the rest of us checked and the remaining term was the same. So we're getting them extended - by 999 years! Our three solicitors quotes were all in range £400 - £500 per flat, which seems eminently reasonable. Each of the 6 flats has an equal share in the freehold, no idea if this makes a difference or not. But on the face of it seems pretty straightforward and probably worth doing, then you can forget about it forevermore

There is so much misinformation on this thread. Yes, it only costs about £500 to extend a lease if you have share of freehold. (You do still need a lease).

It's a completely different scenario if you have a landlord. It depends on how much ground rent you pay, but if it's about £100 a year for a 200k flat with only 84 years left you are looking at about £5k plus solicitor and surveyor fees (so probably about £8k in total - you have to pay the landlord's legal fees as well as your own).

Please ignore anyone who says let it drop to 70 years - you need to renew before the 80 year mark, otherwise you'll be looking at around £15k plus fees.

You can work it out by using the calculator here (see how much it increases after the 80 year mark has passed) - https://www.lease-advice.org/calculator/

(Remember you will need to add legal fees and surveyor costs to this amount).

My advice though is probably to sit tight until you get closer to the wire. It won't increase that much and the planned leasehold reforms may become law before then, which will save you time and money.

Oh, and also ignore anyone says you don't need a solicitor. It's a complicated process and unless you have a lot of experience in this area, you DO need a solicitor.

birthofanorange · Apr 20, 2022

kevo said:
There is so much misinformation on this thread. Yes, it only costs about £500 to extend a lease if you have share of freehold. (You do still need a lease).

It's a completely different scenario if you have a landlord. It depends on how much ground rent you pay, but if it's about £100 a year for a 200k flat with only 84 years left you are looking at about £5k plus solicitor and surveyor fees (so probably about £8k in total - you have to pay the landlord's legal fees as well as your own).

Please ignore anyone who says let it drop to 70 years - you need to renew before the 80 year mark, otherwise you'll be looking at around £15k plus fees.

You can work it out by using the calculator here (see how much it increases after the 80 year mark has passed) - https://www.lease-advice.org/calculator/

(Remember you will need to add legal fees and surveyor costs to this amount).

My advice though is probably to sit tight until you get closer to the wire. It won't increase that much and the planned leasehold reforms may become law before then, which will save you time and money.

Oh, and also ignore anyone says you don't need a solicitor. It's a complicated process and unless you have a lot of experience in this area, you DO need a solicitor.

That ties-in with what I've looked at so far, especially the 'marriage value' once it drops below the 80 year mark. As for a solicitor, I wouldn't dream of entering into it without one.
Knowing how long this (and pretty much every government, to be fair) takes to pass any reforms, is it likely to happen in the next few years?

Live by the sea · Apr 20, 2022

birthofanorange said:
Just the 4, and I did enquire about the possibility of buying the Freehold, but we need more than 50% of the other owners to be interested, but they don't appear to be.

Try to push your neighbours into buying the freehold , it will be the cheapest option probably.

kevo · Apr 20, 2022

birthofanorange said:
That ties-in with what I've looked at so far, especially the 'marriage value' once it drops below the 80 year mark. As for a solicitor, I wouldn't dream of entering into it without one.
Knowing how long this (and pretty much every government, to be fair) takes to pass any reforms, is it likely to happen in the next few years?

This is the big question. The report on the reforms was published last year and it was meant to be discussed in Parliament but keeps getting deferred in favour of more pressing issues. There is pressure on the government as the reforms are long overdue and they are meant to be treating it as a priority. Even if the legislation is passed though, it could still be subject to legal challenges. It will happen over the next few years for sure, but whether it does before you have to renew is anyone's guess really. It might be worth waiting a year or so just to see what happens. The price may go up a bit in that time but not a huge amount.

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