Surprised by low offer from leaseholder?

by Property118.com News Team

9:37 AM, 16th November 2020
About 2 weeks ago

Surprised by low offer from leaseholder?

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Surprised by low offer from leaseholder?

I have a flat where I am a freeholder. There are only two flats in the building,

A couple of months ago, I had been contacted by the leaseholder to extend the lease as there is only 68 years left. I said to them that we would need to get a surveyor to value the lease.

To my surprise, I was contacted by a company who specialise in lease valuations who was representing the leaseholder with an offer. The offer seemed low at 6K

I then went onto the various leaseholder calculators and the range seems to be around 9-15K, 12-16K. One calculator gave 12K low, 14k Medium and 15K High

What the protocols to follow. Should I pay for a Surveyor to carry out the lease valuation? They normally charge around £500.

Many thanks

Jim


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Comments

Jo Westlake

10:58 AM, 16th November 2020
About 2 weeks ago

I extended a lease earlier this year. It was 67 years so similar to yours.
I had to pay for my valuer and solicitor and also for the freeholders valuer and solicitor (both of which were somewhat more expensive than mine).
My valuer valued the lease extension premium at £11600, theirs at £12500. We agreed on £12050. In total the fees for both sets of valuers and solicitors came to £4700.

Jo Westlake

11:04 AM, 16th November 2020
About 2 weeks ago

I extended a lease earlier this year. It was 67 years so similar to yours.
I had to pay for my valuer and solicitor and also for the freeholders valuer and solicitor (both of which were somewhat more expensive than mine).
My valuer valued the lease extension premium at £11600, theirs at £12500. We agreed on £12050. In total the fees for both sets of valuers and solicitors came to £4700.

Lindsay Keith

11:34 AM, 16th November 2020
About 2 weeks ago

Depending on where you are, I recommend ODT LLP Solicitors in Brighton. They acted for me as a leaseholder when I also extended a short (I think about 60 years?) lease. Well worth the fees, as the other side were useless and missed deadlines. ODT knew exactly what they were doing, as did the surveyors.

Jo Westlake

11:39 AM, 16th November 2020
About 2 weeks ago

I was trying to edit the above. Didn't mean to post it twice.
That was a Statutory lease extension. The version that extinguishes all future ground rent and adds 90 years to the lease.
It is also possible to do a Negotiated lease extension where the lease can still include ground rent and can be for whatever period you agree to. This is much cheaper for valuer and solicitor fees.

Which route to go depends partly on the attitude of the freeholder and partly on why someone is extending the lease.

I did a negotiated extension 3 years ago with a really good freeholder. Minimal fees, extra 90 years and no nasty new charges in the extended lease. I did a Statutory extension this year with an absolutely horrendous freeholder. Other flats in the building have negotiated extensions and apparently (according to an estate agent) were given 3 versions to choose from with varying levels of ground rent. Something like a 30 year extension with ground rent of £150 a year cost about £11000. The freeholder couldn't be bothered to tell me what the negotiated options were so I went straight in on the Statutory route.

If someone just wants to extend the lease so they can sell the flat negotiated is fine (for them). That person won't have to live with whatever is negotiated.
If someone intends to retain ownership long term and the freeholder is as rapacious as they can be Statutory is the way to go.

For the freeholder it's all about compensation. Either they get a guaranteed ground rent income for the next however many years or they get a big lump sum up front and no future ground rent. Or with a negotiated extension they get both if the leaseholder agrees to it.
Marriage value comes into it when a lease drops below 80 years.

Jamie Harris

16:23 PM, 16th November 2020
About 2 weeks ago

I heard lease laws are being reviewed. As owner of a flat with a short lease, do you think it will be beneficial to wait a while before renewing? I still have a few years left on the mortgage.

Thanks

BernieW

18:15 PM, 16th November 2020
About 2 weeks ago

As the freeholder, it is in your best financial interest to do nothing. To see why, watch this video > https://youtu.be/vIRj8olRDeI

Obviously, if I were advising a leaseholder - I'd say serve a section 42 notice asap.

Puzzler

7:10 AM, 17th November 2020
About 2 weeks ago

The amount will vary according to the value of your flat which you don't give. Of course they will make a low offer, you need to get your own valuation done

Jamie Harris

11:07 AM, 17th November 2020
About 2 weeks ago

Reply to the comment left by BernieW at 16/11/2020 - 18:15
Thanks Bernie, nice video.
I'm the leaseholder.
Value of property c£215k (guess)
Term: 24.06.1990 to 24.06.2089
Length: 99 years
Ground Rent: £300 per annum
Ground Rent Increases: 24.06.2040 £450
24.06.2065 £600 etc

I've been told by another leaseholder on the same development who extended one in the last 2 years it will cost £10k

Does that sound about right?
Thanks

BernieW

16:46 PM, 17th November 2020
About 2 weeks ago

Reply to the comment left by Jamie Harris at 17/11/2020 - 11:07
Never take figures from another leaseholder - as individual lease extensions have individual circumstances.
Punch the information into the LEASE online calculator to get a rough premium amount > https://www.lease-advice.org/calculator/
Happy to discuss specifics.

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