How much to charge myself for lease renewal?

by Readers Question

10:45 AM, 16th February 2014
About 7 years ago

How much to charge myself for lease renewal?

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How much to charge myself for lease renewal?

I own a 1 bed flat in Walthamstow that is part of a converted house, with one other flat above. As part of the sale, in 2003, I gained the freehold for both properties. The lease agreement for both flats now has 74 years to go.

My flat was sold on a lease basis, so I have both the lease and the freehold. My question is, as freeholder, do I have to pay my self the going rate to extend the lease, or is it possible to do this for a nominal fee, say £1? How much to charge myself for lease renewal?

Also the owner of the flat upstairs has not addressed the fact that the lease is dwindling – should I suggest we renew, or do I wait for him to say so? Obviously the longer it is left, the more expensive it will be for him, and possibly me?

Thanks

Jo



Comments

Graeme

11:16 AM, 16th February 2014
About 7 years ago

Hi Jo,
I speak from experience - I own 2 x 2 bed flats in Walthamstow. I have purchased the freeholds of both on a 50/50 basis with the lessee of the upstairs flat in both cases. The lease of on 1 has been extended. The other is being done now.

In your case you obviously own 100% of the freehold. You do not have to pay yourself anything to extend the lease on your own flat !! You just get your solicitor to re-issue a new lease or do a deed of variation on the existing lease.
At some stage in the not-too-far-distant-future the lessee of the other flat will need to ask for an extension to their lease - flats with shorter leases become very difficult to mortgage. You just need to make sure that the terms of both leases are the same and operate in harmony. It won't cost you much money when their lease is extended - they have to pay all the legal fees for both parties - and you will get a nice premium for granting an extended lease - based on my Walthamstow experiences it will be somewhere close to £20,000. Good luck.!!

r01

14:24 PM, 16th February 2014
About 7 years ago

Jo,

Graeme is correct but why do you want or need to extend the lease? It is only if you want to re-mortgage (it is only a problem for those stupid jobsworth idiots in building societies/banks who cross the "T's" and dot the "i's"). If you want to sell it may be worth waiting until that time, then offer a brand new lease for however many years make it the most attractive marketable prospect. But this is not necessary if you sell with the freehold as the new buyer has no problem either because like you, they can extend their own lease to as long a period as they wish whenever they fancy.

Given the above, you need do nothing at all right now because it will never get more expensive for you to issue a new lease other than in legal fees which may increase, or then again they may reduce - who knows? There are issues such as stamp duty (now SDLT - see http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm14090.htm), on leases with very high rentals but as residential leases are usually not much more than a peppercorn rent this is unlikely to affect you. Here is a really useful link for you - have fun and remember me in your will please - lol...

I wouldn't say anything to the other lessee. Just sit back with a large glass of bubbly happy in the knowledge that the longer they leave asking you to extent or renew their lease, the more you will make.

Happy days ...............

R

r01

14:25 PM, 16th February 2014
About 7 years ago

Jo,

Graeme is correct but why do you want or need to extend the lease? It is only if you want to re-mortgage (it is only a problem for those stupid jobsworth idiots in building societies/banks who cross the "T's" and dot the "i's"). If you want to sell it may be worth waiting until that time, then offer a brand new lease for however many years make it the most attractive marketable prospect. But this is not necessary if you sell with the freehold as the new buyer has no problem either because like you, they can extend their own lease to as long a period as they wish whenever they fancy.

Given the above, you need do nothing at all right now because it will never get more expensive for you to issue a new lease other than in legal fees which may increase, or then again they may reduce - who knows? There are issues such as stamp duty (now SDLT - see http://www.hmrc.gov.uk/manuals/sdltmanual/sdltm14090.htm), on leases with very high rentals but as residential leases are usually not much more than a peppercorn rent this is unlikely to affect you. Here is a really useful link for you - have fun and remember me in your will please - lol... http://www.moneysavingexpert.com/mortgages/extend-your-lease

I wouldn't say anything to the other lessee. Just sit back with a large glass of bubbly happy in the knowledge that the longer they leave asking you to extent or renew their lease, the more you will make.

Happy days ...............

R

Graeme

16:08 PM, 16th February 2014
About 7 years ago

Reply to the comment left by "r01 " at "16/02/2014 - 14:25":

Jo,
The comments made by r01 are very valid too.
Whatever you do - whether you decide to act now or wait for a while, the ball is totally in your court.
It would seem that you made a very sensible buy back in 2003.

Jeremy Smith

19:43 PM, 16th February 2014
About 7 years ago

Depending on your age, and if the other lessee waits long enough before realising to renew, or wanting to sell, the other flat will be cheap enough for you to buy that one as well !!

Presumably when the lease expires, the title reverts to the freeholder, who is you anyway.

Jo .

8:27 AM, 17th February 2014
About 7 years ago

Thanks for all the advise guys. Now I know it won't cost me anything extra as the lease dwindles, I am going to sit back and wait!

Jo .

8:30 AM, 17th February 2014
About 7 years ago

Reply to the comment left by "Jeremy Smith" at "16/02/2014 - 19:43":

I like your thinking Jeremy! The reason I looked into the lease was because we are considering getting into property developing, and a flat I had my eye on was on for peanuts because of the short lease.

Puzzler

15:46 PM, 22nd February 2014
About 7 years ago

http://www.property118.com/is-leaseholder-or-freeholder-owner-of-property/63755/?utm_source=messagehorizon&utm_medium=email&utm_campaign=weekly+22%2F02%2F2014

See this thread above - I have been advised that the freeholder cannot hold a leasehold in the same name, otherwise the lease ceases to exist i.e. you cannot grant yourself a lease, hence the usual practice of setting up a company. Or in the thread above each was placed in the alternative names of a couple. If you have no borrowing it won't matter but a lender would not lend on that structure. More information on this one please.....

Graeme

18:43 PM, 22nd February 2014
About 7 years ago

Reply to the comment left by "Puzzler " at "22/02/2014 - 15:46":

Don't think that this is true.
Referring to my 2 Walthamstow flats both of my freehold titles and my leasehold titles are in my personal name. The freehold title also has the name of the leaseholder of the other flat on it as well. The amended leases for 999 years etc. have a clause in them that the freehold interest MUST be sold with the leasehold interest, so as to eliminate the possibility of absent landlords etc.
On one of the flats, we did set up a company which ran for 5 years. However, in a revue another solicitor said that we didn't need the company since there are only 2 of us involved, so the freehold interest was transferred to a separate title in our personal names and the company dissolved.

Jeremy Smith

20:40 PM, 22nd February 2014
About 7 years ago

Reply to the comment left by "Puzzler " at "22/02/2014 - 15:46":

I suppose if you are the freeholder of a flat, it doesn't matter if you have a lease on the flat or not, you own it anyway, and will continue to own it after any lease runs out.

If you wanted to sell the flat, which would be one of two or more in the building which you own, you can just create a new lease, I am presuming, since I am not legally qualifed.

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