Lease Extension Valuation
We were recently instructed by the Landlord of a ground floor, 2 bedroom flat in Bude, to provide advice on the premium payable in respect of the statutory lease extension of the long leasehold interest in their property. Our Client is the owner of the freehold interest in the building and the flat is subject to a 99 year lease from 1974.
Under the Leasehold Reform Housing and Urban Development Act 1993, long leaseholders (tenants) have the right to extend their lease. The law gives qualifying Tenants the right to extend their lease by 90 years, in addition to the unexpired term they already enjoy, at a ‘peppercorn’ rent; this means there is no ground rent to pay.
Under the Act, the Landlord is entitled to receive a premium which is made up of potentially three elements; the reduction in the value of the Landlord’s interest, in qualifying cases a share of the marriage value and any reduction in value of an interest the Landlord has in another property or any other loss which comes as a result of such an interest.
In this particularly case, the lease had approximately 53 years to run and the Landlord was enjoying a rather generous ground rent, with a rent review in around 20 years’ time. We calculated the diminution in the value of their interest and the share of the marriage value, which was applicable as the lease had less than 80 years to run. We did not consider there was any compensation payable for any reduction in value of any other interest held by the landlord.
We provided our Client with a best and worst case scenario in terms of the premium payable by the Tenant, which is in addition to the reasonable cost of any professional fees incurred by them. Following our advice, we are delighted our Client has accepted an offer at the higher end of the range provided.
Vickery Holman have an expert team of Chartered Surveyors who specialise in this more complex area of valuation. We can negotiate the premium payable and where required, represent at tribunal. If you are considering extending your lease or have been served notice by your Tenant, please contact a member of our team to discuss. You can read more about Valuation here.
