90 Leasehold Extension On London Flat

**shaunbhoy** · 7 October 2006, 12:31

the privaledge of the extenstion

My advice would be to buy a property in a country where they speak your first language mate.

**TinTin** · 7 October 2006, 13:10

Newbie

I agree with SB, you are either new to the country or the property market is not your strongpoint. Even a small flat in Chelsea can cost in excess of £ 1m so what do you expect, change from £ 650k ? IMO it's not a lot to ask for, however you should bear in mind that if you are talking about a block of flats then the majority of leaseholders have to agree to do the same ie apply to extend the lease or even buy a share of the freehold. The market price you expect to pay is not arbitrary but determined by factors like initial price, location, no of flats etc and the freeholder must accept arbitration in case of a dispute. For further advice, could you ask a local resident like Roman Abramovich or AtW (another Russian who frequents this board)

**MarillionFan** · 7 October 2006, 14:01

This types of lease normally relate to commercial property. Is the flat in an office block or above shops?

It shouldnt cost that much AFAIK. The landlord is legally required to give you an extension in law. I am surprised you would consider this though

**Nipple Clamp** · 7 October 2006, 17:01

Originally posted by messiah

basically I saw a really nice London chelsea flat for 650K with only 21 years left on the leasehold (100 sq/meters), I discovered from the agent that the typical cost to me to extend the leasehold for 90 years on top of the market value of 650K would be 190K !!!!! and if I do not then once the 21 years if up if I have not ratified a lease extension agreement with the landlord then you essentially 'give up' the right of owning the property which you may actually have paid the mortgage off on and the landlord then HAS THE RIGHT TO CHARGE YOU MARKET RATE RENT ON YOUR OWN PROPERTY THAT YOU HAVE SLAVED TO PAY OFF THE MORTGAGE ON FOR 21 YEARS !!!!!

I very much doubt if anyone would give you a mortgage on such a fast depreciating asset, except at an extortionate rate.

The Leasehold Reform Act sets conditions on whether leaseholders can compel a freeholder to extend leases or sell the freehold. It depends, among other things, on the number of flats in the block, and whether the freeholder lives in the block. Less than a certain number, e.g. a divided former single residence, or a resident freeholder makes everything harder if not impossible (or certainly used to).

Apart from the legal aspects like those, a lot also depends on how commited the other leaseholders are, and financially well placed, to take concerted action. Is there a resident's association for example?

**wendigo100** · 7 October 2006, 17:16

It's not your problem.

How about buying another flat instead?

**Ardesco** · 7 October 2006, 19:45

It's a standard Leasehold thing, that's the way leaseholds have always been. Thats why a lot of people want the freehold of a property, not just the leasehold.

Bear in mind that you can Apply to purchase the freehold after you have lived in the property for a couple of years (although if it is a flat you will need to get the others on your floor to do the same thing).

If it's a real problem just refuse to purchase until the current owner has extended the lease, otherwise walk away.

**hattra** · 7 October 2006, 20:06

Duh,

You're buying a lease on the property - not the property! The freeholder still "owns" the property, but has sold the leaseholder the right to use the property for a certain amount of time. Of course he gets it back at the end of the lease - in the same way as you don't get to keep a property when you stop paying rent on it. All a leasehold really is, is is a rental agreement where most of the rent is paid up front, so if you want to extend the period of rental, naturally you have to pay up front.

You have various rights to force an extension of the lease, or to purchase the freehold, but you still have to compensate the freeholder (who doesn't get the £650k, don't forget) for the compulsory loss of his or her asset.

IIRC none of those rights apply to "short" leases - i.e. with less than 15 years to go

**IR35 Avoider** · 8 October 2006, 09:20

I saw a really nice London chelsea flat for 650K with only 21 years left on the leasehold (100 sq/meters), I discovered from the agent that the typical cost to me to extend the leasehold for 90 years on top of the market value of 650K would be 190K !!!!!

In other words, you are able to "own" the flat for 21 years for £650K or for 111 years for 840K. The latter sounds like a better offer. Whether or not this is good value depends on what else you can get for similar money in the area, and also on whether housing is generally a bit over-priced at the moment.

Actually I find the English system of leasehold for flats quite sensible, and the extra rights the government has given flat-owners to forcibly acquire a share of the freehold surely makes the system of ownership almost as good as anything to be found elsewhere?

The one reservation I have about the system is that the "rules" of how a building is run are fixed for all time by the lease and cannot easily be varied. For example, where I live we have to pay management charges twice a year in advance, rather than spread over twelve monthly payments by direct debit as most people would prefer, because that's what the lease says. We have been categorically told that it is not legally possible to change this. When we wanted to install Sky the management company (owned and run by residents) couldn't pay for it because the leases do not allow it to make improvements, as opposed to doing maintenance. In the end the company that owns the freehold (also owned and run by residents) coughed up. I suspect that was a legally dubious decision by the directors, since the freehold company won't in reality get any economic return from this "enhancement" to its property. I'm glad they did it though, even though it was my money they were spending. (I'm among the one third of residents with shares in the freehold company.)

I'm aware that in other countries it is possible for rules to be created/changed/repealed by majority vote at any residents (owners) meeting. This is one element that is missing from the English system, though I am aware that it does also lead to its own set of problem because (where residents are running everything themselves) you have in effect "laws" being drafted and enforced by people who aren't lawyers and who don't understand the legal pitfalls. (My parents have just moved out of such a development: impractical rules passed weren't enforced, which opened up residents collectively to being sued by one of the residents who wanted the rules enforced.)

Edit: It seems that there has been an attempt to introduce something like the above with the introduction in 2002 of "commonhold" as an alternative form of flat ownership in England. I'm still not clear if it allows you to change the "rules" though.

**AtW** · 8 October 2006, 09:40

And I was told that freehold normally adds around 10 grand onto a price (for average house of 200k), and can be easily purchased - perhaps this applies only if remaining lease is very long anyway?

90 Leasehold Extension On London Flat