LEASE EXTENSIONS PRESENTATION TO OWNERS OF MARINERS WALK MARINERS - PowerPoint PPT Presentation

LEASE EXTENSIONS PRESENTATION TO OWNERS OF MARINERS WALK MARINERS WALK AGM – 30 th JULY 2012 David Robson MA(Oxon) MSc MRICS Tom Merralls (LLB) Solicitor

• Why should I extend my lease? • Valuation and legal services • How do we progress from here? • Open forum for questions

WHAT IS A LEASE?  A right to use a property HOW LONG CAN YOU USE IT FOR?  Remaining number of years left on your lease ...i.e. With a leasehold property you are effectively renting for a certain amount of time.

WHAT DOES THIS MEAN?

OR TO PUT IT ANOTHER WAY... As if a regular AST

HOW THE GOVERNMENT EXPLAINS IT: “A lease is a right to use the property for a period of time. As a lease gets shorter the value of the lease and in real terms your property decreases and it becomes more expensive to extend the lease. Sometimes it is difficult to sell a property with a short lease (anything less than 80 years) because mortgage lenders may be reluctant to lend money on such properties.” [Source: The Leasehold Advisory Service - www.lease-advice.org ]

HOW DOES THIS AFFECT ME?  I don’t care what happens in 70 -80 years!  However...  Look to sell at some point? ○ Solicitors: Advise purchasers for extension if 85 yrs or less ○ Lenders: Higher rates (at best) for 70-80 yrs. Virtually unmortgageable under 60 years!  WHAT WOULD YOU DO AS A PURCHASER?  WHAT COULD YOU DO AS A PURCHASER?  SALE DEPENDENT ON CASH BUYERS / AUCTION  Wish to remortgage to raise some money? ○ Lenders: Same problem as above.  Pass on the ‘asset’ to a family member/s? ○ What asset?!

THE MORE TIME GOES BY THE MORE IT WILL COST...

What can be done? Can try to extend by direct negotiation with the freeholder  Extend under rights of Leasehold Reform Housing and  Urban Development Act 1993  Depends on circumstance and the freeholder...  E.g. Assigning rights to extend the lease to a purchaser to enable completion of a sale. Commercial freeholders: It’s their business - they know valuing a  leasehold interest is complex, and therefore often quote and negotiate for extortionate premiums and try to get flat owners to sign up to onerous and costly terms.

Leasehold Reform Housing and Urban Development Act 1993 Rights Extend 90 years onto existing term (not just back to 99 years)  £0 ground rent for duration of entire lease (never mind periodic increases!)  ...in return for a premium based on valuing the extension of the lease to compensate the freeholder accordingly. N.B. Finance and responsibility of the flat owner to pay for ( reasonable ) professional fees for both sides... but as a group there can be savings through economies of scale!

The Process

Valuation Issues  Date of Valuation Present Market Value of the Property   Market Value of the Property with new lease Relativity   Capitalisation of ground rent Calculation of reversion  Marriage Value (if lease is under 80 years) 

Valuation Service  Provide the “best and worst” case valuation, in order to best advise you of the possible outcome of the negotiations; Advise on the amount of the offer to be made either to open the  negotiations or in the Notice if served under the Act; Respond on your behalf to the freeholder’s Counter -Notice to the  offer made in the Notice; Negotiate on your behalf the price and the other terms of the  lease, including representation at the Leasehold Valuation Tribunal (“LVT”) if this becomes necessary.  Robson v Sinclair Gardens 2011

Legal Issues (for extension under the Act)  Leaseholder Qualification  Owner of long lease for 2+years?  Originally granted lease must have been for a minimum of 21 years?  100% ownership if originally shared ownership?  ...etc... Freeholder   Address?  Intermediate landlords / head lease?  Absentee freeholders?  Copy of service charge demand or ground rent receipt Once the process has started – controlled by statutory  rules and timetable

Legal Service  Preparation of the information of the application; Service of the s.42 Notice on the competent landlord (along  with copies to head leaseholders and managing agents if applicable); Response to landlord’s request for information if required   10% deposit (subject to £250 minimum)  Deduction of legal title Conveyance of the new lease. 

Pros  Safeguard and improve the value of your property  No more ground rent payments to worry about  Could be the difference between selling your property or not  Maximise / enable a potential remortgage Cons  Process can take 6-12 months...N.B. If you are thinking of selling soon  Cost  Payment of reasonable professional fees for both sides even if you withdraw Having the finance for the premium and fees must be considered ... although in a group the process can be structured to benefit from economies of scale on the professional fees. Act sooner rather than later, especially if approaching 80 years!

Going Forward We’ve hopefully demonstrated we’ve got the expertise...but how do we work together to bring you savings? Lines of Communication

Professional Costs per Estate  Valuation Service  Legal Service Notice Conveyancing TOTAL 1 £600 per flat (usually £750) 1 £750 £750 £1500 per flat 2-5 £450 per flat 2-5 £450 £500 £950 per flat 6-10 £400 per flat 6-10 £400 £450 £850 per flat 11-15 £350 per flat 11-15 £350 £400 £750 per flat 16+ £300 per flat 16+ £300 £400 £700 per flat Plus disbursements: c.£200 LVT work (if applicable): £230 per hr Additional legal work: £230 per hr N.B. Prices subject to VAT N.B. Prices subject to VAT Freeholder’s ‘reasonable’ valuation fees Freeholder’s ‘reasonable’ legal fees

Going Forward (Cont.) Follow-up email from us for you to confirm interest to proceed with extension (within 14 days) Instruction, Terms & Conditions from Robsons and TJM Law Return signed documents (within 21 days) Serve s.42 Notices

Summary  Safeguard and improve the value of your property  No more ground rent payments to worry about  Easier to sell  Maximise / enable a potential remortgage  Economies of scale on professional fees

Questions

Useful Web Links www.lease-advice.org  http://www.lease-advice.org/documents/Lease_Extension_Getting_Started.pdf  www.lease-advice.org/calculator 

Members of David Robson MA(Oxon) MSc MRICS Tom Merralls (LLB) Solicitor david.robson@rrsurveyors.co.uk tom@tjmlaw.co.uk Ray Robson BSc FRICS MAE MIoD Tel: 020 8662 6090 ray.robson@rrsurveyors.co.uk www.tjmlaw.co.uk Tel: 020 8402 6666 www.leaseextensionvaluers.com