Many flat lessees can be faced with tempting offers from landlords on a lease extension that is done “informally” or “outside the Act”. The Act would otherwise give a flat owner lessees who can prove ownership for at least 2 years a 90 year extension on top of what they have already and the ground rent reduced to nil or a peppercorn. A Landlord may offer to reduce the premium, their fees and even grant a 999 year lease. The ground rent they say is £TBA or RPI Linked. Sounds good but we say Beware!
Flat lessees must weigh up all the information to compare what is on offer to what they are entitled to by law. RPI indexation seems a sensible idea but the starting amount must be known also the frequency and dates of review. RPI has increased by just over 30% in the last 10 years but over the last 40, well within a lease term, a whopping 818%. It is no co-incidence that ground rent investor landlords can pay 50% more for long leases where the ground rent is linked to RPI than where one is not!
Of course a flat owner may wish to extend under the Act at any time after but any premium payable will have to take into account the income and future growth that a landlord will lose as a result of the lease extension.
Our service guides flat owners in the right direction for them and helps to give them an objective view so that together with help from their Solicitor they can make the right decision.