Berth Leasing???

[Guest]

I've been offered a lease on my mooring which I currently pay for annually. What are the pros and cons that other leaseholders have experienced? Is a 10 year lease at a cost of 10xcurrent annual rate a reasonable offer?

 

[claymore]

I would have thought a commitment of 10 years on your part would have brought a reduced rate from the owner. If there is no reduction offerred, It might be worth checking how much the cost has risen over the past ten years and then you could see what kind of future saving you are making by pegging in at todays prices. Another consideration is whether you will still want to be there in 10 years and if you do want to move elsewhere, can you sublet or are you committed to meeting these charges?

 

[AndrewB]

Quite unreasonable ...

... assuming the money is to be paid up-front.

It will only pay off if over the next 10 years the price of the mooring rises in real terms, that is against inflation, or more relevantly, against your own disposable income. This will be most likely to happen if either your own income declines, or if the demand for moorings rises relative to supply over the next 10 years. But will either of these happen? Who can say? Its just a gamble.

If in the long term prices are not expected to change much in real terms (relative to inflation), there is still a thing economists call the "rate of time discount": which in layman's terms means that you normally pay less upfront for long-term investments. For public investment HM Treasury used to recommend a 6% discount for costing investment - which works out that if you ask a government agency to pay upfront for a 10 year investment, you can expect to ask only about three-quarters of what it would cost on a year by year basis calculated at current prices.

On top of the rate of time discount, there is a potential additional benefit to the mooring owner in guaranteeing a customer for that long, for which a further discount could be made - though this may be offset by the value to you of the security of tenure you would be given.

 

[Guest]

Many thanks for all the replies. You have given me food for thought.