Advice needed on lease (flat) extension - yield + deferment

[sparks85]

Good evening,

I am in the position where I have a 1 bed flat that requires the lease extending.

Prior to my Solicitors sending the freeholder the formal Notice to get the ball rolling, I need to devise an initial offer.

I've spent the evening research and have worked up an estimate - using a work example and tweaking certain factors to fit my circumstances - over which I have a few queries.

If anyone would be so kind as to cast their eye over the queries I would be grateful. I know I could pay for a pro surveyor and may well do in due course, however as with much in the property industry I am reluctant to fork out a chunk of money - especially as I am saving hard for a wedding - for what may well just be some cookie cutter calculations.

I have utilised the example here:
http://www.lease-advice.org/publications/documents...

My calculations predominantly revolve around the yield rate and deferment rate - all the other variables I can confidently determine. There is a surprisingly lack of up to date information/examples available on the internet.

1. I have assumed a yield rate of 5% - taken from Sportelli - is this a reasonable figure to use
2. I have assumed a Deferment rate of 5% - taken from Sportelli - is this a reasonable figure to use

3. Finally, my current and future property values are based on a discussion with a trusted estate agent - would it be beneficial getting formal valuations from them in writing?

I can send through the calculations for interrogation if required.

I would seriously appreciate a steer from the PH community.

Thanks in advance
Ben

[sparks85]

Bump for the morning

[curley]

In my experience however you calculate it the landlords counter offer will come back at a higher level .

I was in the fortunate position of being able to get a proper valuation pro bono ( which took the form of a range ) . I put the notice in at 85% of the mid point valuation amount and ended up settling at about 120% of it ( which was still less than the higher end valuation I was given)


In my case the passing ground rent was only £30 or so and there was no marriage value calculation so the sums were relatively small and I was just buying before the lease dropped below 80 years to protect the capital value .If you have a high ground rent , the ground rent is subject to escalation in the future or you have a short lease take professional advice . The range of outcomes could be very large and any landlord with his head screwed on is going to have a good surveyor .

[sparks85]

curley said:

In my experience however you calculate it the landlords counter offer will come back at a higher level .

I was in the fortunate position of being able to get a proper valuation pro bono ( which took the form of a range ) . I put the notice in at 85% of the mid point valuation amount and ended up settling at about 120% of it ( which was still less than the higher end valuation I was given)


In my case the passing ground rent was only £30 or so and there was no marriage value calculation so the sums were relatively small and I was just buying before the lease dropped below 80 years to protect the capital value .If you have a high ground rent , the ground rent is subject to escalation in the future or you have a short lease take professional advice . The range of outcomes could be very large and any landlord with his head screwed on is going to have a good surveyor .

Thanks for the feedback. I'm informed the freeholders surveyor is likely to come back with a higher valuation and then we have two months to negotiate. I went ahead and proposed a figure for the initial Notice based on some calculations, however I have the benefit of knowing what the extension cost on another property in the block 1 year ago, so used that as a sounding board.

I am astonished to find no website online (that I could find) that breaks down the calculation clearly with a full explanation. Even the .gov website is a riddled with mathematical assumptions. Always show your working! - is what I was taught!!

[Alpinestars]

Have you seen things like this?

http://www.viewsontheblock.co.uk/insights/extendin...

I bought the freehold on a couple of flats a few years ago, and represented myself at Tribunal.

I used a capitalisation rate of 7% and a deferment rate of 5%. The decision broadly went in my favour.

There used to be loads of decisions, with calcs on the LVT website.

This is also a good ball park calculator of premium.

Edited by Alpinestars on Friday 19th February 21:09