Lease Extension and RPI effect on sale and marketability?

by Readers Question

10:39 AM, 19th May 2016
About 2 years ago

Lease Extension and RPI effect on sale and marketability?

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Lease Extension and RPI effect on sale and marketability?

I am extending my lease and FH made offer of: 1) Premium:£10,000.00 2) GR: Adjusted to £200.00 Per Annum subject to increase every 25 years in line with Retail Price 3) Term: Additional 90 years to unexpired term (99 years from 01.12.1986) 69 years +90 Years = 159 yearsdecide

Currently the GR is twice the initial rent of £75 = £150

Original lease terms:
1st 25 years – £75 “initial GR”
Next 25 years – £150 (twice initial GR)
Next 25 years – (3x inital GR)
Residue – (4x initial GR)

I want to know what the current offer will do to the marketability of the property if I sell. If I keep and try and bequeath to son will the RPI be too much of a problem in years to come as cant project that far ahead. I have 10 days to get back to them and I am not sure what to say.

I would appreciate some advice.

Regards
Maria



Comments

David Price

14:20 PM, 20th May 2016
About 2 years ago

I would try to form a Right to Manage company before attacking the lease extension. Take control away from the freeholder, you will find that costs come down considerably. Then you can collectively negotiate with the freeholder to buy the freehold and you are in total control. If you can convert to a commonhold, difficult as everyone has to agree, but failing that a freehold in common leaseholder ownership.

S.E. Landlord

16:39 PM, 20th May 2016
About 2 years ago

I would use the statutory route where the ground rent would reduce to a peppercorn. I suggest you contact a surveyor who has experience of valuing properties for this purpose and a solicitor with experience of serving statutory notices for lease extensions.
If you would like an indication of the correct cost for a lease extension check the lease webpage which has a calculator on it.

Tony Lilleystone

15:38 PM, 23rd May 2016
About 2 years ago

Ground rent reviews of the sort you mention are not looked on with any favour by mortgage lenders, so you could find marketability affected by difficulties in buyers getting a mortgage. Better go down the statutory route where the GR is reduced to a peppercorn.

Fraser Maldoom

9:13 AM, 8th December 2017
About 10 months ago

You are right to be suspicious of RPI ground rent increases as their effect on marketability has yet to be tested. To see how what you have been offered compares with the statutory basis to which you are assumed to be entitled (subject firstly to 2 years of ownership) try a lease calculator http://www.capitalleasehold.co.uk/lease-extension-calculator/ before obtaining expert professional advice. Do not let any more time slip by!


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