Black's Property Blog

Adrian Black delivers critical property market insights and the influences, behaviour and money driving them.

Demystifying lease extensions and buying a share of freehold

by Adrian Black, Friday 20 May 2016

 

We often get asked how the length of a lease can affect the value of a property. It is a pretty well defined determination requiring a set process and a certain level of judgement and possibly the involvement of the Leasehold Valuation Tribunal (LVT).

Fundamentally, the process considers the remaining length of lease, ground rents and what is called a marriage value - or the value of combining the freehold with the leasehold.  You will need a valuation surveyor for the property and a solicitor to manage the process. The process involves determining the value to be transferred - which for the bankers amongst us is valuing a stream of cash flows.  Given that this happens quite often and the LVT are very helpful they publish data on judgements and plot a graph which demonstrates the relatives derived from LVT determinations. The following link will explain this graph in further detail.

http://www.lease-advice.org/publications/documents/relativity.pdf



The crux of the process involves picking the number of years remaining on the lease and thereafter finding the residual % of value in the lease.  It will probably provide the best rough indication as the information plotted is actual judgements - and the more judgements the greater the statistical confidence.

We are very happy to put you in contact with valuation surveyors and experienced solicitors if that is helpful.

For more information contact us on 020 7908 9280.

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