The impact missing the 80 year threshold can have on your premium
Whilst it is advisable to extend your lease sooner rather than later it is particularly important to extend your lease before it reaches less than 80 years if possible. This is because under 80 years an additional factor, known as the marriage value, has to be added to the premium payable to the freeholder, which can be significant.
Using the Lease Advisory Service calculator (http://www.lease-advice.org/calculator/) we set out an example of the impact this can have on the cost of a premium, taking a flat with a value of £250,000, a ground rent of £100 per annum, an initial term of 99 years, and varying the unexpired lease term between a) 80 years exactly and b) 79 years 364 days.
Why not try it yourself? Although do take note of their disclaimer on the opening page as it is only a basic online calculator designed to give you a general guide as an initial indication to the cost of the premium for extending a lease. It does not take into account all the factors that can affect the premium value and works on generic variables.
N.B. The date a lease is signed is not necessarily the date the lease is said to commence. It is the commencement date that is key for calculating the years remaining on a lease.
Client sought a lease extension under the Act, although the freeholder was keen to agree an extension on non-statutory terms. The offer on non-statutory terms was analysed, which in this instance would have had a severe impact on future saleability if accepted. Client was advised to continue with the claim under the Act (Formal route) and a favourable agreement was reached on the statutory terms.
Client sought a lease extension on a lease with just over 80 years remaining from the freeholder, who owned the flat above. Given the 80 year threshold was rapidly approaching the valuation was carried out promptly and the client was strongly advised to serve the Initial Notice to raise a claim via the Formal route and protect the position against marriage value becoming applicable to the premium. Despite also contacting suggested solicitors to draft and serve the Notice, the client decided to try and seek an agreement via the Informal route. Unfortunately, the client made contact with Robsons a few months later regretting the fact our advice hadn’t been followed as the freeholder had hindered efforts to take matters forward and was now seeking a higher premium as the 80 year threshold had now passed, costing the client several thousand pounds.
Client initially approached Robsons for a Home Survey on the property which they were looking to buy and mentioned their solicitors had drawn to their attention the length of the lease remaining. In conjunction with the survey we advised on how best to proceed in order to protect their position regarding the lease extension and provided our valuation for the premium. A claim was made under the Act prior to exchange of contracts and a very favourable premium was subsequently agreed against the freeholder and intermediate leaseholder for the new owners, with a saving in the region of £5,000.
Client had made a claim under the Act relying on an out of date valuation. In the meantime the original valuer had retired and the solicitors had to make an application to protect the position before the deadline passed and the claim deemed withdrawn. Robsons were instructed a week prior to the date the valuers must have exchanged valuations in accordance with Tribunal directions. An updated valuation was carried out and negotiations were conducted in a timely fashion to reach a very satisfactory agreement at £65,000 where the freeholder’s Counter Notice had claimed £110,000. Needless to say the extra costs associated with proceeding to Tribunal were also avoided.
Clients sought to have a valuation carried out for the purchase price of their freehold. The valuation was carried out and advice was given for the purchase price and apportionment ranges for the freehold and individual flats, respectively, along with a figure for the Initial Notice for starting the claim via the Formal route. Following discussion with the client the Informal route was attempted in the first instance using the figure suggested for the Initial Notice offer, which the freeholder accepted without seeking professional valuation advice, resulting in a significant saving (in excess of £25,000) for the purchasing leaseholders.
Robsons received instruction for the apportionment of the purchase price offers put forward to three independent groups of leaseholders within one week following their mutual freeholder being put into administration. The Buildings included a block of three conversion flats; a block of 14 purpose-built flats and a block of 16 purpose-built flats, all in Greater London. Given the tight timescales provided by the legislation for the leaseholders to respond to such offers, the valuations and apportionments had to be carried out promptly for the leaseholders to consider their options, instruct solicitors and make arrangements to finance their respective purchases. All three groups succeeded in purchasing their freeholds.
“From the initial enquiries to the valuation appointment and receiving the report, David and Jane have both provided an excellent service - extremely helpful, quick and efficient. It was fantastic to finally have the process explained to me clearly, as I was stressed and confused about the whole thing until I spoke to them. Now it's done and I'm so grateful. Thank you very much!”
L. Patterson – Leaseholder of a flat in Croydon
“Very friendly, easy and professional. Swift responses. Superb result re our leasehold extension: very highly recommended.”
C. Powell – Leaseholder of a flat in London, W1
“Seeking to extend the lease on my flat, I am very pleased the solicitor specialising in leasehold enfranchisement recommended Robsons Chartered Surveyors. Robsons prompt response clearly outlined their terms. Readily answering any queries, their regular updates throughout the process were helpfully and clearly explained. I was delighted Robsons negotiations resulted in an agreement close to their ‘best case’ valuation. I wouldn’t hesitate in recommending Robsons surveyors.”
Leaseholder of a flat in Beckenham