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Lease Worth <Mooring>


mark99

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Looking for some opinions, being vague to protect the innocent.

 

High demand, very good strictly leisure facility mooring: 30 year lease.

The annual mooring cost is normally say £5.5K.

If aquire lease, the annual fee drops to "ground rent" = say £780/pa.

How much is the lease worth?

 

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This is a straightforward 'future value' calculation for an accountant.

To do it, you'll need to state your inflation forecast for the period of the lease. Or more accurately, state the interest rate you'd otherwise get on the capital for the period of the lease.

Or even more accurately, both!

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yer but by taking a lease you save £4.65K p/a in fees you would have paid for not having a lease

7 minutes ago, ditchcrawler said:

Is that ground rent fixed or does it go up by a percentage every year. Do you want to moor there for 25 years, if not what's it going to cost you to terminate the lease if they wont let you sub let?

G Rent goes up by RPI. Will be long term stay.

Can sell lease on. So in 5 years leave and try find buyer for 25 years lefts Obvs the less the lease left, the less it's worth.

To terminate lease, no cost - if cant sell it leave it empty.

Edited by mark99
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Be careful. I spoke to several people in a Spanish marina who thought buying a lease was a good idea. They now pay as much in ground rent and maintenance costs as it costs to rent a berth at a nearby marina so their leases which were expensive are impossible to sell on.

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3 minutes ago, sailor0500 said:

Be careful. I spoke to several people in a Spanish marina who thought buying a lease was a good idea. They now pay as much in ground rent and maintenance costs as it costs to rent a berth at a nearby marina so their leases which were expensive are impossible to sell on.

Thanks - will be getting legal expert to look but useful info. The lease does limit increase to rpi.

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Just now, mark99 said:

Thanks - will be getting legal expert to look but useful info. The lease does limit increase to rpi.

The thing to watch for is the maintenance cost. The ground rent may be linked to rpi but maintenance is usually at cost and they decide the cost each year. In the case of the Spanish marina that was the problem. Maintenance was increased each year until it became the same as renting a berth.

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4 minutes ago, sailor0500 said:

The thing to watch for is the maintenance cost. The ground rent may be linked to rpi but maintenance is usually at cost and they decide the cost each year. In the case of the Spanish marina that was the problem. Maintenance was increased each year until it became the same as renting a berth.

Ok thanks. Warning noted.  ;)

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The problem with this sort of question is you have to make some assumptions about inflation and investment returns on capital for the next three decades.  Given the current political situation would anyone like to make a forecast for the next five years? 

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1 minute ago, Neil2 said:

The problem with this sort of question is you have to make some assumptions about inflation and investment returns on capital for the next three decades.  Given the current political situation would anyone like to make a forecast for the next five years? 

Only looking for gut feeling worth. Not accountancy rules.

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17 minutes ago, mark99 said:

Only looking for gut feeling worth. Not accountancy rules.

Ok.  Say I had seventy grand sat in the bank I might look at it given that after I've paid the ground rent it's about a 7% return on capital.  

That's assuming your estimate of typical mooring prices is rock solid - this must be some location..?

 

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3 minutes ago, Neil2 said:

Ok.  Say I had seventy grand sat in the bank I might look at it given that after I've paid the ground rent it's about a 7% return on capital.  

That's assuming your estimate of typical mooring prices is rock solid - this must be some location..?

 

Ta Neil.

My account is also looking at a price. But he is not a boater.  ;)

 

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I think these schemes are good for marina operators, enabling them to raise large chunks of capital. The boat owner continues to pay index liked rent, and pays an annual "maintenance " fee which is whatever the marina operator decides upon. He is also stuck in that location. My advice would be to leave it alone.

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14 hours ago, mark99 said:

Looking for some opinions, being vague to protect the innocent.

 

High demand, very good strictly leisure facility mooring: 30 year lease.

The annual mooring cost is normally say £5.5K.

If aquire lease, the annual fee drops to "ground rent" = say £780/pa.

How much is the lease worth?

 

Just to say "BEWARE"

I know of a boater who bought a "30 year lease" on a leisure mooring. The marina operator was selling leases because the business was seriously strapped for cash (too many non-working owners taking a wage).

Naturally, having sold a couple of leases and used the cash to pay off the overdraft and pay the owners a few quid in much deserved bonuses, the business that wasn't previously bringing in enough cash to meet its outgoings now had less money coming in each month for the same outgoings, and in due course went into liquidation.

Those who had bought a lease discovered that they had bought no such thing. The management didn't own the marina, they leased it from BW, and hadn't granted a lease at all. The boaters had simply pre-paid 30 years moorings at what was, on paper, a substantial discount.

With the company in liquidation, the site reverted to BW, and anybody who had pre-paid simply became an unsecured creditor of the liquidated company with no further right to the mooring.

They lost about £20k

 

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If the annual profit rent is £5500- £780 = £4,720

 X Years' Purchase 30 years at (say) 7% - 12.409

                                                                 £58,570

But as has been pointed out, you would need to be clear that £5,500 pa was indeed the annual market rate and that the £780 pa could not rise disproportionately and includes  the same costs and benefits within the £5,500 pa.  Otherwise the annual profit rent is not £4,720

 

 

Edited by Tacet
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22 hours ago, Neil Smith said:

£5,500 seems very expensive for a leisure mooring unless in the middle of London.

Neil

 

Given the location of the OP I think it is probably west London.

£5.5k seems too cheap for the middle of London anyway!

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23 hours ago, mayalld said:

Just to say "BEWARE"

I know of a boater who bought a "30 year lease" on a leisure mooring. The marina operator was selling leases because the business was seriously strapped for cash (too many non-working owners taking a wage).

Naturally, having sold a couple of leases and used the cash to pay off the overdraft and pay the owners a few quid in much deserved bonuses, the business that wasn't previously bringing in enough cash to meet its outgoings now had less money coming in each month for the same outgoings, and in due course went into liquidation.

Those who had bought a lease discovered that they had bought no such thing. The management didn't own the marina, they leased it from BW, and hadn't granted a lease at all. The boaters had simply pre-paid 30 years moorings at what was, on paper, a substantial discount.

With the company in liquidation, the site reverted to BW, and anybody who had pre-paid simply became an unsecured creditor of the liquidated company with no further right to the mooring.

They lost about £20k

 

 

Wasn't something very similar to this described as happening in the long "Pillings Lock Marina" thread? 

But it seemed to get forgotten about once CRT caved in and accepted the phoenix company as the new lessor. 

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10 hours ago, mayalld said:

Just to say "BEWARE"

I know of a boater who bought a "30 year lease" on a leisure mooring. The marina operator was selling leases because the business was seriously strapped for cash (too many non-working owners taking a wage).

Naturally, having sold a couple of leases and used the cash to pay off the overdraft and pay the owners a few quid in much deserved bonuses, the business that wasn't previously bringing in enough cash to meet its outgoings now had less money coming in each month for the same outgoings, and in due course went into liquidation.

Those who had bought a lease discovered that they had bought no such thing. The management didn't own the marina, they leased it from BW, and hadn't granted a lease at all. The boaters had simply pre-paid 30 years moorings at what was, on paper, a substantial discount.

With the company in liquidation, the site reverted to BW, and anybody who had pre-paid simply became an unsecured creditor of the liquidated company with no further right to the mooring.

They lost about £20k

 

If you are getting a title to the mooring, registered at the Land Registry, then you are protected against the 'landlord' failing, but you will incur the legal costs of the conveyancing process. If it is not registered, then you may be at the risk Dave sets out.

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Yes to title. Yes to Land Reg.

As I deal with land lease and easements regularly (via specilaist) to get me permission to install our engineering kit on third party land it will be added/buried in task list.

 

Edited by mark99
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