To ask whether leaseholds are REALLY UNFAIR?

[Whatamesshaslunch]

We own a flat that now has quite a short lease (less than 70 years). In order to extend it, the freeholders are asking for £75,000!!! This on a London flat that is worth £600,000. We would have to sell the flat in order to pay, but no one will buy it because they'll see the lease and run a mile. Grrr.

So my question is, in this day and age, why do we have this system? We are the only country to have leaseholds like this.

Our house has 725 years to go on an 800 year lease. We pay £10 pa to the leaseholder. Doesn't bother me much.

I think what the solicitor is referring to is the way marriage value is calculated (the amount you pay to extend your lease once it drops to below 80 years which includes part of the enhanced value of the flat). The calculation is made on what the flat would be worth if it had a long lease - so, say, £700,000 - minus what it is worth with its current lease length and pretending, for the sake of the calculation, that extending it isn't a legal possibility. So a sort of raw value to own it for ~60 years which might be much lower than the £600,000 you estimate.

I think it's a disgraceful situation.

We are also in London, and have a 'share in freehold' flat, which we were delighted to get a few years ago, as the majority seem to be leasehold.

Even with our share in freehold, there are so many ridiculous rules we have to abide by, and things we are not allowed to do.

We are not allowed a dog under any circumstance.

We are not allowed any other pet without asking permission first of the management committee, and gaining permission - we do not know of anyone here who has been successful in gaining permission.

We are not allowed on the majority of grassed areas.

We are not allowed barbecues.

We are not allowed access to our attics (if we are in a top floor flat).

We are not allowed to make any alterations to the windows without permission.

We are not allowed to put a welcome mat outside our own front doors.

We are not allowed to keep a pram anywhere in the large communal areas.

The document of rules is several pages long, so there are many more than listed above. It is the biggest load of bollocks I've ever read in my life, and I'm not surprised that most people living here look fucking miserable all the time. It's incredibly expensive and you can't bloody do anything!

We are not allowed to keep a pram anywhere in the large communal areas

Good.

Thats a fire hazard plus makes the flats look horrible and when people leaving bikes, general tat that doesn't fit in their flats...

OP the leasehold system isn't a bit shit but you really do have to be ontop of the situation and extend your lease before it drops below the 'magic number'.

Did you not research all this when buying the flat?

Presumably the leasehold status isn't a surprise to you. In which case you acted with informed choice.

If possible, try to speak to other owners in the same block. See if they have extended their leases and try to find out what they paid.

If they too are low on the lease and worried about the knock on effect on the property value then perhaps you could come together collectively and apply pressure to the freeholder to come up with a more affordable solution.

Thanks lala for the translation

@5rivers7hills yes and tried to extend first off with lots of the other flats, but were refused. We then procrastinated (silly us, now paying the price) and are now trying again along with one other flat.

The lease calculator suggests £52k. Not wonderful but a lot better than £75 and helpful for negotiation - thank you to those who suggested it.

Thanks for that. I hope you get it sorted out OP

We extended our Brighton flat 10 years ago. Flat was worth £250k and we paid just under £8k including all solicitors fees. That was to go from 78 years to 125 years. If we hadn't been in the middle of selling, we'd have counter offered, because the valuation had come in £2k lower, but we didn't want to lose the buyer and their mortgage company wouldn't agree to it without the extension already in place (We offered to transfer right to extend to new buyers to avoid further delay and reduce price).

Have you had someone in to value the leasehold extension? Then you'll know whether the £75k is correct or they're taking the piss. We did that first and sent a copy of the report to the freeholder with our initial extension proposal.

It seems strange that your solicitor or Conveyancer didn't advise you to request a lease extension before you purchased, as the previous owner should have had the right to extend for free or very little in comparison to your quoted extension price. If it wasn't extended you surely paid a lower price to buy the flat, due to the short lease?

Most mortgage companies make this an issue as well.

If you don't need to sell why bother extending - won't you be dead in 70 years?

I rationalised exactly that when I bought mine - I will be well dead before the 120 years are up

Use the statutory process. Unless your ground rent is ridiculous, there's no way it'll cost £75K.

I don't really understand leases at all tbh - why is such a long lease required?

It's a sore point with us. Neither of us had any experience of leasehold properties before moving here and were not aware that a 68 year lease was classed as short and would cause problems. Our solicitor didn't bother to mention it and, as we were putting down a large deposit the mortgage company wasn't bothered either.

The lease is now down to 58 years and will cost around £30k to renew, which we don't have. Mind you, I'll be 100 when it expires so it's not going to bother me as we've got no plans to move!

If you don't need to sell why bother extending - won't you be dead in 70 years

None of us know what's round the corner though. We have no intention of moving but don't want to be stuck with an unsellable flat if we need to realise the capital or get the fuck out of dodge. I think it's quite shortsighted to not extend your lease if/when you can because it can leave you stuck with a property you can't sell when you really need to.

Gees £75k! Definitely don't accept that figure. Once you have finally agreed a figure could you remortgage (as you said you don't have the money)?

I think we are doing the statutory process, as far as I can tell from googling - we're requesting an extra 90 years with a peppercorn rent.
Oh my brain, it's not up to this grown up stuff.
The flat is on the small side for our expanding family so we will need to flog it and get out of London.

Yanbu to think it's a batshit system. Feudal shit! I could never get my head round it at law school.

Leaseholds aren't the problem, the problem is that the leaseholds you are talking about were only 125 years at the time they were created. So now 50+ years later they are getting too short, In other places the leasehold term is 999 years and consequently no problem as the building will have fallen down before that expires.

I'm just doing mine - just outside London and costing £12k + fees - no idea what the fees will be. I negotiated down from £15k. I only got a mortgage this time based on extending the lease - I wouldn't have been able to remortgage if I hadn't extended. I probably would have got it down further if I'd gone to tribunal but I needed the freeholder's permission to get work done and I knew it would go against me if I didn't just pay up. It sucks really, the upstairs flat was £7.5k but mine had gone under 70 years, I thought it was 72 years.

A couple of other things to bear in mind:
A) you will probably need to pay the landlord's fees as well as your own.
B) you can put in a claim for the lease extension and then if you want you can assign the benefit of that claim if you sell.

Really make sure you get a specialist on this though. You've seen from your own experience when buying the place that a lot of solicitors don't have a clue. I've seen many claims which were invalid due to technicalities, and negotiated with lots of professionals who haven't got good deals for their clients. As you've seen, there's lots of technical case law in this area to get to grips with.

We are in the midst of a lease extension on a flat we own. We hired a surveyor who specialises in this area because we realised that we didn't know how the process works in enough detail. For example, the other side came back with a high premium given the value of the flat but also requested changes to the lease. Our surveyor picked that up immediately and said that the lease has to be on the same terms. This has given us some extra bargaining to go back with.

Given the amounts involved I would get a specialist surveyor to work with you. Ours will cost us around £1K but I have no doubt that he will get the premium more than £1K lower than we would.

When I sold my flat back in 2003, because I was getting married and moving away, the buyers asked for a reduction in the sale price to cover extending the lease. But it was only by £5k.

I found out this information before selling so I was able to pass on the information to the buyers, I knew the question would come up.

Mind you, the lease had a bit more time on it, about 80 years as I recall, and it was a much cheaper flat, 130k. I also owned it outright so that helped.

I would double check that valuation, that does seem excessive, and a much higher percentage of the value of your flat.

We are the only country to have leaseholds like this

No you're not.

It is a crazy crazy system. Either you own the place or not, why have this stupid freehold/leasehold thing?

We bought the freehold when we bought our house. We bought the housing association that owned 20% out so that might have been how we wangled it.