Are my freeholder’s proposed lease terms reasonable?

by The Chartered Surveyor

Question

My wife’s aunt has gone into secure dementia care with care fees in excess of £4k per month. As Powers of Attorney, we are left with the need to meet the care fees by selling her leasehold flat. The current lease has 55 years to run.

 
The landlord has quoted a premium of £12k for a new 150 year lease. In addition, the ground rent proposed for the new lease as £100 per year, rising by 10% every 2 years.
 
Are we right in thinking that the £12k premium is high, and shouldn’t they have also quoted for a 99 or 125 year lease i.e. to give options? Also, I thought on a new lease of this type that there would have only been a ‘peppercorn’ ground rent. The £100 increasing by 10% has been deemed by our solicitor and estate agents as almost making the flat unsellable under such a lease. 
 
Would appreciate your views, especially if we are entitled to any protections under the 1993 Leasehold Act. 

Answer

Your solicitor ought to be able to advise you as to whether your aunt is eligible to extend her lease under the Leasehold Reform, Housing and Urban Development Act 1993. There are a number of criteria which need to be met, although from what you have said I see no reason you should not act under your Power of Attorney in doing so.

The Act entitles you to a 90 year extension at a peppercorn ground rent. Once served notice under the Act, the freeholder must either accept the terms of the notice, or serve counter-notice within the specified time limit stating which terms of the notice are accepted and which are disputed. The fact that the Act entitles you to a 90 year extension at a peppercorn ground rent cannot be disputed in the counter-notice, thus if the right to extend is excepted, the new lease must be offered on these terms.

However, until notice is served under the Act, the freeholder is under no obligation to offer an extension under any particular terms, or indeed at all.