Lease extensions and freehold purchase valuations

We are able to provide clients with one or more of the following: the provision of a preliminary report, as well as valuations and advice, to enable the client or qualifying tenants make an informed decision on whether to exercise their rights. 

There are two rights for long leaseholders, both of which are contained within Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993 as amended by the Housing Act 1996 and the Commonhold & Leasehold Reform Act 2002.

The first right is a group right for leaseholders of flats to purchase the freehold interest of the building in which they reside subject to certain qualifications.

The second right is for the individual lessees to renew their lease which, in effect, adds 90 years to the unexpired term of the existing lease.

For the lease extension, the 2002 Act has abolished the previous residency test and the property now has to be owned by the qualifying tenants for a period of at least 2 years before a claim is made. It has also abolished the low ground rent test and also provides for the valuation date to be fixed at the date of the claim. There is no marriage value where the unexpired lease term exceeds 80 years. Otherwise, the marriage value is fixed at 50:50. The calculation of the premium to be paid for lease extension is set out in Schedule 13 part II of the Leasehold Reform, Housing and Urban Development Act 1993 and is a total of:

a) The diminution in value of the landlord's interest in the flat,

b) The landlord's share of the marriage value and

c) Compensation for loss arising from the grant of the new lease.

The marriage value is the potential for increase in the value of the flat arising from the grant of a new lease and the 1993 Act requires that the "profit" should be shared between the parties.

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