Lease Extension – Nightmare Freeholder

by Readers Question

10:03 AM, 9th February 2015
About 4 years ago

Lease Extension – Nightmare Freeholder

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Lease Extension – Nightmare Freeholder

I have a 2 bedroom flat on a lease with 77 years remaining. I have it up for sale (and its in excellent condition) but the problem seems to be the duration of the lease (feedback from estate agent).

I would like to extend back to the original term of 99 years, and the nightmare is that the freeholder lives downstairs (its a detached house conversion of 2 flats). They have been nothing short of a nightmare for my current tenants (noise disturbance) and despite me speaking to them, and confirming my concerns in a letter to them, the noise continues.

My dilemma is that I am loathe to ask them for the lease extension, as I think they may try and refuse to communicate, and also the thought of handing over my money (approx. £5k) to them really sticks!
Can anyone offer advice on the best way to resolve this?

Many Thanks

Shirleycatch 22



Comments

Chris Amis

12:26 PM, 9th February 2015
About 4 years ago

Just subscribing the thread really, I have a flat in a similar position.

I googled up a couple of the many companies on the web who deal with lease extensions and just asked them if the FH wanted to torture me, how much could it cost in various solicitors, surveyors and hearings.

It was way more than the 'cost' of the extension in the various calculators, perhaps you could try the same the results you get.

(I am not putting the figure here, I would not want to give the £$%"%^ ideas) 🙂

Welcome to wonderland...

r01

12:47 PM, 9th February 2015
About 4 years ago

If you can really get a lease extension for £5k which I find unbelievably cheap, clearly it would be best if you extend the lease.

The problem with converted rather than purpose built flats is that they are often not adequately sound proofed and even closing doors gently causes noise which is bound to affect the other flat. My son once lived in a maisonette but worked nights and had a problem with an elderly couple living below who were really quiet but forgot he was always sleeping in the day. In the spring, summer & autumn they would leave an outside door or window open and that would cause inner doors to slam.

You have to appoint a solicitor for the sale anyway, so if you don't want to speak with them, get your solicitor to write to the freeholder on your behalf and request an extension of the lease.

You might be surprised as the freeholder has two positives from this:-

1 Income from the extension of the lease.
2 The opportunity to get rid of a rental situation - he/she may be just as fed up with a winging tenant as the tenant is with a noisy freeholder.

No-one wins in a war so it is always better to swallow your pride and negotiate an uneasy peace. Even though it it might stick in your throat, an apology to the freeholder for the tenants "sensitivity" to noise might smooth the way and get you a better price and quicker sale. What have you to lose by trying?

R

Chris Amis

13:50 PM, 9th February 2015
About 4 years ago

Or 3, if for some reason you need to sell at some point and have to go to auction, they have a chance to pick it up in an auction for a song.

And what do you have to loose by asking? Well just be careful to not accidentally trigger one of those processes where you are forced to pay the FH costs and give them 10% deposit (in a trust account hopefully).

Of course not all freeholders are like that, only you know how bad yours is, or if they are that clued up.

And yes, if the FH said 5K in writing, rip their arm off... And then sell it.

Mike W

15:37 PM, 9th February 2015
About 4 years ago

Try the lease advisory service. Free advice and government run. You have rights which you should learn about. Plenty to read on the website.

Tony Lilleystone

15:47 PM, 9th February 2015
About 4 years ago

Your query highlights some of the problems that property owners face with our ridiculous system of leasehold ownership for flats, and the way that freeholders can hold leaseholders to ransom.
But as the law stands at present then if you really don't want to pay the freeholder anything you will just have to try and find a buyer who is prepared to take the existing lease.
A lease with 77 years unexpired should be mortgageable but as many mainstream mortgage lemders now require a minimum of 70 years buyers will be advised to factor in the potential cost of getting a lease extension when making an offer.
Buyers will also be advised that once the lease term falls below 80 years something known as 'marriage value' has to be included in a valuation of the premium payable for a lease extension.
So faced with a choice between similar properties buyers will generally opt for the one with a lease with at least 80 years to run, and preferably one that has already been properly extended.
So if you're not prepared to get a lease extension yourself you will have to be prepared to accept less for the flat than you might have hoped for.
If you are currently eligible to apply for a lease extension under the Leasehold Reform Housing and Urban Development Act 1993 (your solicitor should be able to advise you on this if you don't a;ready know) then you could try to negotiate a deal by agreeing to serve a statutory notice and then assigning this to the buyers at completion. However buyers are still going to want a discount to take into account the premium they are likely to have to pay, as well as all the costs etc.
It might be worth your while to get a professional valuation of the property with and without a lease extension so that you can get a better idea of the difference. An expert valuer who deals with lease extension valuations in your area will also be able to give you a much better idea of how much you might have to pay for an extension.
I have to add that in my view it is a false economy to try and get a lease extension without going through the statutory procedures under the 1993 Act. True this will involve costs as well as the premium but freeholders will often ask for all sorts of changes to the lease (e.g. an escalator clause for the ground rent) as well as offering far less than the 90 year extension available under the Act. (I will be happy to expand on this if you like.)

The Leasehold Advisory Service website has more detailed information on statutory lease extensions. http://www.lease-advice.org/publications/documents/document.asp?item=8#competent

Freda Blogs

18:33 PM, 9th February 2015
About 4 years ago

Tony is right, although there are occasions where getting a lease extension on a non statutory basis could be beneficial, but this doesn't sound like one of them.

I think you would be best to get the valuation as suggested and as appropriate share it with prospective purchasers. If they don't ask, don't offer it as some will buy without requiring a lease extension. Once you have a purchaser lined up, you will most likely be asked if you will serve a S42 Notice, which is the notice that initiates the lease extension process. You should agree to do this and the purchaser can then use it without having to wait for the two year ownership requirement. Maybe do this after exchange of contracts prior to completion to minimise any time for friction with the freeholder.

Good luck.

Ps if the valuer says it's more than £5k and your freeholder is still offering it to you at that figure, you may want to reconsider your approach, but only do that if there is a big differential, ie to make it worth your while, because the freeholder could prejudice your sale if he isn't cooperative...

Shakeel Ahmad

21:34 PM, 9th February 2015
About 4 years ago

There is a website that calculates the cost of extension of lease. The price will depend on the post code, unexpired period etc.

The Freeholder in most cases will not agree to a price. He will want a valuation done so a surveyor will be involved & yes you pay for it & in addition you will have to pay your & the Freeholders legal fee.

The extension should be for a further period of 90 years with peppercorn ground rent. Most Freeholders will try & continue/insist that ground rent is payable and increase by RPI etc after say 10 years. Thus making your flat less attractive to future buyer.

Our current system is under pinning a feudal system and guess who is the biggest landlord in this country ? Would you like her, her family and other relatives to give up there wonderful portfolio's in Central London & the Country estate ?,

Freda Blogs

21:58 PM, 9th February 2015
About 4 years ago

I am a valuer and have a lot of experience in these matters. The websites you mention are good for a quick idea of premium but cannot cater for a number of cases, especially where the leases are more complex.. If you are serving s S42 notice, I strongly recommend you get a proper valuation as you/ your purchaser may need to justify the valuation in negotiation with the freeholder. Getting one from a website is a false economy.

If you serve a s42 the freeholder is obligated to give you the 90 year extension at nil ground rent as required by the legislation. Only if you go the informal route without S42 can the freeholder seek to vary the terms as Shakeel suggests, and in these circumstances neither party has to agree if they don't like the terms on offer.

I hope this clarifies things.

Shirley Harvey

22:28 PM, 10th February 2015
About 4 years ago

Thank you all for taking the time to provide your advice. I will look into all the options advised and see what works best for me.

Jay James

17:17 PM, 23rd November 2017
About A year ago

Reply to the comment left by Shirley Harvey at 10/02/2015 - 22:28
Hi Shirley
How did this situation work out?

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