How can you guess the value of a lease extension?

[NotHangingAround]

A family member is considering buying a flat. (FTB) The lease is pretty short, meaning it would be tough to sell on unless she gets an extension for it. The lease is owned by the local council who suggest that you propose a fee for the lease extension (max 90 years). We are clueless as to what that should be. Is it a percentage of the original cost? How do we guess its value so the council doesn't turn her down (she's aware she can't apply for the first two years, by which time the lease will be close to the cut off point which the council unhelpfully says will be more expensive (without saying what that means.)

Has anyone a clue about this? Is it thousands? Tens of thousands? A percentage of the market value?

Usually tens of thousands, I'm afraid.

Also, she is unlikely to get a mortgage on a property with a short lease.

We had a flat with a 89 year lease. We didn’t end up extending before we sold, but I got all the quotes which was total about £10k. I also know someone in the same council and similar value flat who extended for £10k total. I wouldn’t buy a flat if the lease will be under 80 years by the time they can extend.

Under 80 years, “marriage value” applies which increases cost significantly

There are calculators online. I extended in 2011 and couldn't afford to add 90 years. We increased from 72 to 99 years for £4000.

It's time to extend again soon but this time I can afford a full extension.

You don't guess, you get a specialist surveyor to provide a report. I ended up having to extend the lease on my flat - had bought it thinking there was 89 years left (estate agent details) but it turned out when I came to sell that there were 79 years left. Cost me £8k for the renewal and a further £3k in survey and solicitors fees. That was 15 years ago.

The current owners should be able to pass on their rights to extend so she doesn't have to wait 2 years to apply.

I renewed mine from 70-ish I think in 2021 and it cost £17k, also cost £1k for share of freehold.

Ah, this is really helpful. I naively thought that 99 yr extension meant an extra 99 years on the leas, but it just means extending it to 99 years. That could help if she can't afford the full extension. Then she could buy a bigger extension before selling on.
Thank you.

If you have share of freehold, why also need a lease? Doesn't freehold ownership override that, otherwise you are leasing from yourself?

Sounds expensive. Was this from a private freeholder or a council? I was told councils aren't always so greedy

@NotHangingAround it was private and I got screwed because it was already on the market when the time left came to light - my crappy solicitor hadn't picked it up when I bought the flat. The survey valued the lease renewal at £5-£6k but the freeholder is allowed to counter and by the time he did (used his max reply time) I was desperate because my buyers were getting twitchy.

I'd sincerely hope a council would not be as mercenary but you're probably still looking at thousands rather than hundreds. You're responsible for your solicitor costs and those of the freeholder.

Look at lease-advice.org for a calculator - this will just be the lease extension not survey or solicitor costs.

You can extend by 90 years eg if there's 85 left, it goes up to 175.

There are changes planned by the government but no date so I wouldn't rely on it being cheaper.

If the flat has a short lease and she needs a mortgage she may run into trouble - that's why I had to extend mine instead of reducing the price and handing over extension rights, my buyers couldn't get their mortgage.

Hi, we're just going through this process at the moment so feel free to message me privately if you want a chat.

This online calculator was pretty good, and there's good advice on the site in general there.

www.lease-advice.org/calculator/

Thank you all so much. This thread has been incredibly helpful.

You can own a share (or all of) the freehold but still hold a leasehold.

I owned the freehold of a block of flats I held a leasehold for and lived in. I was essentially the freeholder and was responsible for maintenance and insurance, collecting payments etc.

I also used to work for a very large freeholder and I'd never buy a leasehold again.

@OldTinHat I know people who owned share of freeholder. They had issues with another owner...