Appraisals and Valuations

Getting Started

Our Appraisals and Valuations

We shall tell you the range of premium that you should expect to pay or receive. There is no precise amount that can be attributed to a lease extension, as there are a range of factors to the premium calculation. As experienced valuers we are able to narrow the anticipated range.

Once you have received our report as a leaseholder you are ready to begin the process of extending the lease. As a freeholder you will be ready to respond to the notice and meet any statutory deadlines.

The Premium

There are generally two elements to a lease extension:

1.    The freeholder’s loss
2.    Any marriage value payable

The freeholder’s loss is calculated by: 1. Valuing the ground rent payable throughout the existing lease term and adding that to the value of receiving the flat back at the end of the existing lease; and, 2. Comparing this with the present value of receiving the flat back at the end of the extended lease.

If the lease has under 80 years remaining (and marriage value is payable) an additional calculation is needed. This is calculated by comparing what the sum of what freeholder and leaseholder have after the lease extension with what they both has before. Any difference (or profit) is known as the marriage value. Under the 1993 Act, this is shared equally between the freeholder and leaseholder.

The value of the flat before and after the lease extension is a contentious area and it is here, where most disputes arise.  This is why it is important not to allow your lease to fall below 80 years, especially if you are currently trying to sell.
Call us and we shall talk you through the options available that may speed up the process.

The Premium
The Process

The Process

The formal procedure and most commonly used method to begin a lease extension is by service of a Section 42 Notice pursuant to the Leasehold Reform, Housing and Urban Development Act 1993 (as amended). A Section 42 Notice is served on the freeholder and any other parties who have an interest in the lease (such as a head leaseholder, who may be entitled to a share of the premium).

The Notice should contain the amount in which the leasehold is willing to pay for the extension on statutory terms. This must be a realistic offer or the notice can be invalid. A freeholder has to respond with a Section 45 Notice, by a specified date in the Section 42 Notice, which is normally two months after the date of receipt.

Note: Under the Leasehold Reform Housing and Urban Development Act 1993 (as amended) leaseholders are also responsible for the freeholder’s reasonable legal and initial valuation costs.

The Counter-Notice will typically accept the leaseholders right to an extension but contain a higher premium offer. When this is received, negotiations begin.