Morning lifers,
Im just wondering whether anyone on here knows anything about leaseholds and the process of extending one.
I purchased a flat last year, which has an unexpired lease of 79 years. I understand that as soon as the lease goes below 80 years it becomes more expensive to extend due to something called the ‘marriage value’?!
I have searched the internet for days and can’t really seem to find a definite answer as to how much it will cost me. I have seen a couple of websites which state it may cost me around £4k + expenses. Is this true? I have also heard I can’t do anything for 2 years, again is this true? I also don’t pay any ground rent (I don’t know whether this has any bearing on the cost).
Many thanks for reading this and your advice would be very much appreciated.
0
Comments
As far as I know, the cost of extending the lease is entirely down to the freeholder. I looked into extending the lease on my old maisonette a few years ago and it ended up being more cost-effective to buy the freehold. I was fortunate that the guy who owned the other 'half' of the maisonette was keen to buy the freehold too and we therefore had the legal right to do so. Cost a lot of money but added a lot to the value of the flat too and basically made it marketable.
If not I'd say you have a claim against him/her for professional negligence which would be a way of recouping the costs.
As said residents often buy a communal freehold via a management company in which they hold shares and leases are then newly issued or re assigned via the management company but I'm not a lawyer and there are a few here.
Depending on the type of flat you own, if you can arrange to purchase the freehold then you'll be in a much stronger position.
I did however think this would make the flat more attractive to sell, but we put it on the market on saturday at no higher an amount than it would have been 14 months ago and the estate agents didn't even seem bothered that we own the freehold.
We bought our freehold for 14k between 4 flats (It's a Victorian conversion) if that helps. they wanted £16, we offered £12.
I used Beverley Morris in Blackheath as she specialises in this.
@ LenGlover - Well to be honest with you my solicitors were a complete waste of space (I am not exaggerating here). Everyday I was chasing him up via e-mail and phone. I did ask him for further info regarding the lease and he said he would get back to me – he didn’t (surprise, surprise). In the end I just gave up and left it, I just couldn’t be asked with it anymore. It’s not as if I didn’t know I had to fork out a few bob etc so it wasn’t a huge surprise when I found out. Im just happy to have purchased a property to be honest.
However, looking at the contract last night there was correspondences between the old owner and the freeholder back in 2003. Put it this way, the freeholder is kind of ‘desperate’ to get rid of it, which im hoping bodes well for me.
A friend of a friend bought a house at an absolute steal of a price because the lease was low. Didnt research at how much it was going to cost. Big mistake.
The Freeholder will have an obligation to extend your lease. Get advice from a decent solicitor who knows property inside out to sort if for you...
I used this lot when i bought my house: EMW LAW LLP, Eleanor House Queenswood Office Park NORTHAMPTON Northamptonshire NN4 7JJ.... bit of a long way from London but reaosnable price and do loads of resi, i am sure if you called them they could give you a steer to start with.
I agree Suze, Estate agents don't seem to value this, but any buyer with any sense which is not all of them of course, would do, particularly if they had owned before in that situation and either had a lease running low or dealth with a poor freeholder. It should really make it more sellable against your competition but of course may not up the price significantly if at all
Solicitors and dedicated groups will advise - basic first step is to set up a freehold company and everyone interested puts in a couple of hundred for a share - this to pay for initial advice, survey etc... none of the process is complex and the valuation is based on the freehold marriage value (as above) plus the NPV of the 79 years ground rent. Once started you must stick to certain deadlines especially if the freeholder plays hardball so you need sharp admin cookies onside - either in your block or you pay advisers
There is no time limit overall but the quicker you start the cheaper the overall deal. If the other side are not willing then the downside is that you have to pay their "reasonable" costs to force through a deal but the point is the law changed a few years back to ensure that you can force through a decent valuation even if you end up in a tribunal.
Very good government website which should explain the process and has a calculator for the cost.
If I read it correctly you only pay a premium and go for a lease extension if it results in a higher value for your property. The closer you are to the lease expiring the higher will be the share of the marriage value you pay but the higher should be the value of the property. Conclusion - why would you go for an extended lease if it costs you money and doesn't result in a higher property valuation, just wait until it is worthwhile.
If my memory serves me right the thing about two years is that you cannot insist on the freeholder doing anything during that period but by the sounds of it they are happy to do a deal so probably won't apply.
Other than that, do it sooner rather than let the lease run down any further as this does effect the marriage value.
Who owns the freehold? If its a Housing Association I would negotiate a cap on maintenance costs, you said you dont pay ground rent but there may be a clause stating that you have to pay a percentage towards decoration, roof works, new windows etc.
I would speak to the freeholder and ask them the cost to extend the lease by 30 years, this may cost you a bit more but it will also be more attractive when you sell the property.
1. Owning a freehold adds little or no value to a flat although could be easier to sell if management or ground rents are high.
2. Once a lease dips below 60 years the leaseholder has various rights due to law changes a few years ago. In a number of circumstances they have automatic rights to renewal of the lease back to the original term, usually 99, 125 or 999 years.
3. For the reason above this is why the freehold adds little if any value, but it does of course let you manage your own destiny such as mantainence and repairs, buildings insurance etc.
4. In my experience when we handle the sale of a freehold it more often than not changes hands for a zero value but with the purchaser picking up the legal bill circa £1000.
5. A freehold really only has a value of potential for collecting ground rent i.e. if 4 flats in the block pay £200 per annum then there is an investment of £800 to collect as freeholder. But from this the freeholder must manage, arrange insurance ect for the building. In this circumstance would have a value of say £5000. If ground rents are small which is particularly common on 999 year leases then the owning of the freehold is often more trouble than it's worth and owners often give it away.
6 A freeholder has to by law offer the sale of the freehold to the leaseholder first if wishes to sell and think they have 60 days to decide if want to take up the offer.
All a bit random I know but hope answers at least some of your questions.
Todds - no its not a housing association, just some bloke.
thanks a lot Webber for some of them pointers.
ive had a long hard think about it this evening and ive decided to canx the financial advisor meeting (as Dippenhall rightly pointed out, i dont think they will probably help me out much). as i mentioned earlier from reading correspondances between the previous owner and freeholder, it looks like the freeholder is looking to 'give it away' as it were. im not paying any ground rent (and neither is my neighbour living downstairs) therefore i dont see what he can be getting out of it.
Note: i had a word with my neighbour (shes 76) yesterday. she currently has an indemnity policy and said she doesnt wish to purchase the freehold or to extend the lease as it is of no interest to her.
im therefore going to get in touch with the freeholders solicitor and take it from there