Taylor Wimpey lease – cost of escape?

by Readers Question

11:46 AM, 10th August 2015
About 3 years ago

Taylor Wimpey lease – cost of escape?

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Taylor Wimpey lease – cost of escape?

Recently bought Taylor Wimpey 2 bed apartment. Built in 2007 on 150 year lease. Poorly advised by solicitor. Ground rent doubles every 10 years until 2057. Presently £250, 2017 £500, 2027 £1000, 2037 £2000, 2047 £4000, £2057 £8000. doubling

I planned to keep the properly long term eventually gifting to grandchildren. Anyone any idea how much it will cost me if I have to go all the way to a LVT for a 90 year lease extension and a peppercorn rent?

I know it won’t be cheap and I doubt the freeholder will be co-operative so I may have to go all the way to a LVT. I have read that lay people also sit on the tribunal board – do you think I may get any sympathy having been caught out by very greedy ground rent provisions?

Many thanks

Dennis



Comments

Mike McDonagh

12:09 PM, 10th August 2015
About 3 years ago

Hi Dennis,
How many flats are in the block? If at least 50% feel as you do, best route may be to buy the freehold then you can make your own decisions.
Good Luck, Mike

Shakeel Ahmad

12:31 PM, 10th August 2015
About 3 years ago

This is a quite normal in all new leases. This makes the Freehold worth more when the developer sells.

At least in your case there is a cost stipulated. I have walked away from purchase where the lease stipulates a revaluation every twenty years.

You, can imagine the Surveyors fee, legal fee & you guessed it you pay for it.

A legalised theft & deception. The solicitor should have picked this up as this not something new.

Michael Barnes

14:16 PM, 10th August 2015
About 3 years ago

This equates to a 7.2% anual increase.

Dennis Silverman

20:53 PM, 10th August 2015
About 3 years ago

No idea of cost - as a rough guess could be as much as £20,000. 30 flats in block would be surprised if any others join me due to the high cost. Bought property at good price - been on market for 6 months part way through 3 year company let. I probably paid about £15000 below market value. Online lease calculators are a waste of time - none allow for escalating ground rents whether they double after 10, 20 or 25years, or whether they are RPI linked or HPI linked. I calculate that after 40 years with inflation at 4% then a £500 ground rent would be £2400. Compare this with the £8000 ground rent a TW ground rent will be in 40 year time. So TW will be 3.33 times more expensive. Working back to present day it's like asking at today's prices £1,666 ground rent instead of a more reasonable £500 per annum. Most buyers would want to take at least £12,000 of market value to compensate for the very high ground rent charges. I have been through to several sites selling leases. I have seen blocks of flats for sale with ground rents doubling every 25 years. I have also seen blocks for sale with RPI increases every 10 years and every 25 years but cannot find any sales for leases where ground rent doubles every 10 years. I presume that the LVT use past sales as a yardstick when valuing lease extensions but if very few sales happen then how do they work it out. Any positive ideas as to how much I will have to pay for statutory 90 lease extension with peppercorn rent? (would not get 60% of owners interested in buying freehold)

Hamish Kennedy

19:19 PM, 13th August 2015
About 3 years ago

Hi Dennis I am in a similar position having purchased a 2 Bed Flat from TW at the end of 2011 on a 125 year lease starting in Jan 2008 at £250 doubling every 10 years to a maximum of £8000 . I also was badly advised by Solicitor. On the positive side the flat produces a good rental yield. My exit strategy with this Buy to let and my other two is to leave them to my Daughter. But I would obviously prefer to find away around this issue as it stands with the ground rent clause and the length of the lease - it would make it difficult for me or my Daughter to sell. I did look into applying for a statutory 90 year lease extension with peppercorn rent in Dec 2013 but I was advised it could cost me about 16 K plus costs which would probably taken to it to about £20000 which I could not afford at that time.
Any advice from yourself Dennis if you have made up your mind about what to do or any other 118 members would be most welcome.
Thanks
Hamish

Shakeel Ahmad

20:09 PM, 13th August 2015
About 3 years ago

It may sound obvious. You need to consider whether £20k now is better value or the ground rent for the period that you wish to hold the property.

The buyer will also be looking of his future ground rent liability & may prefer to buy another flat with lower ground rent and this could affect your selling price..

The issue is gaining momentum. I know two instances where the ground rent now is higher than the service charges .

Hamish Kennedy

20:33 PM, 13th August 2015
About 3 years ago

Hi Shakeel thanks for that if I am keeping it long term I would probably be better off paying for the statutory 90 year lease extension soon and save on future ground rent and eventually when it is put up for sale it should be a lot easier to sell at good price.

Shakeel Ahmad

20:45 PM, 13th August 2015
About 3 years ago

That would be my strategy. If the block, where the flat is in desirable area e.g on a river front near the sea, park etc. It will be worth it.

When ever you get around to selling it. Your, flat in the block will be more desirable in comparison with others who may not have taken the steps that you are contemplating.

The longer you delay the more will be the cost of extension of lease as it is known as marriage value. The most optimum value for Leaseholders is 85 years.

Dennis Silverman

20:57 PM, 14th August 2015
About 3 years ago

I have just had quotes from 2 experienced valuers. Both quote very similar figures - a mind-boggling £30,000 to £40,000. The second valuer has actually carried out several of these lease extensions on long lease properties with ground rents doubling every 10 years. The valuer states that the marriage value is nil, the reversionary value is only about £300 but it is all about the loss of considerable future ground rent income to the freeholder. He has revalued all the different cash periods and capitalised them at an assumed 5.5% discount rate. The last valuer says if I could do the lease extension now it would cost me arond £31,000 plus about £6,000 in costs for my costs plus freeholder's costs. If I delay about 18 months until I have owned the property for 2 years before serving the statutory notice for a lease extension then the cost will go up to about £35,000 plus costs.
The valuer suggests I might try making a direct approach to the freeholder now to see if we can do a deal before the qualifying 2 year period. The valuer says that if the freeholder is temporarily 'cash strapped' then I could be offered an attractive deal with minimal expenses. I have nothing to lose by trying other than my time.
I might also offer the freeholder an alternative deal. Firstly not to extend the term of the lease at all beyond the existing 150 years. Secondly to agree to the ground rent doubling but only at 25 year intervals. (this equates to only a 2.85% compound annual increase). So the ground rent could now be 2007 £250, 2032 £500, 2057 £1,000, 2082 £2,000, 2107 £4,000 and 2132 £8,000.
The latter option might be a bit cheaper and would give me confidence that the ground rent is going to stay within reasonable bounds way into the future and is unlikely to escalate to such a level that future buyers are not put off by the high ground rent.
I would recommend that any buyer contemplating a new TW apartment with a similar lease is to agree a fair price and then DEDUCT about £25,000 towards future costs in negotiating a fairer deal on the ground rent.

Chris Amis

21:34 PM, 14th August 2015
About 3 years ago

Or you could wait a bit and hope the law changes, under the current setup once you serve the notice the FH is free to go ramp up fees all at your expense.

Should just be the mean of say 2 surveyor valuation and a fixed calculation (taking into account length remaining and GR).

I would say skip the lease and just buy the FH between the LHs.

Or at the very least do an RTM before something nasty happens.

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