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A lease extension valuation calculates the premium to be paid to the freeholder for an extension. The surveyor will value the property and examine the lease and produce a valuation based on these factors.
Unfortunately your lease is a wasting asset and as its term reduces so does the value of your flat. The extent of this is not fully appreciated in the early years because the decrease in value is generally offset by increases in the housing market.
However when the term reaches 70 years or less it is more difficult to obtain a mortgage on normal terms. It therefore becomes difficult to sell the flat and so it reduces in value. An extension reverses this process and the full value of the flat can be realised on sale. This is the main reason people extend there leases. Unfortunately the longer you leave it to extend your lease the more expensive it becomes.
Before the Leasehold Reform Act leaseholders were at the mercy of unscrupulous landlords who took the opportunity to charge high premiums for the extension and to increase the ground rent. Leaseholders watching their flats devalue had little option but to accept the landlords terms.
For more useful information on Lease Extensions visit: Lease Extensions
Can I extend my lease?
Yes, more than likely! The majority of flat owners will be able to extend under the legislation. There are some legal requirements that must be met. The most significant are as follows:
- You need to own a lease with an original term exceeding 21 years.
- You have to have owned your flat for at least 2 years.
What am I entitled to when I extend?
You will be entitled to:
- An extension of 90 years. i.e. 90 years added to your remaining term.
- Nil ground rent. i.e ground rent is reduced to zero for the entire term of the extended lease.
- The premium is calculated under the legislation i.e. the landlord cannot pick a figure out of the air.
How much will it cost?
The landlord is entitled to compensation for the loss he will experience on granting of the lease extension. This compensation is essentially the premium that you as the leaseholder will pay. It is made up of the following:
- the diminution in the value of the landlord's interest in the flat; that is, the difference between the value of his interest now with the present lease and the value of his interest after the grant of the new lease with the extra 90 years.
- the landlord's share of the marriage value
- compensation for loss arising from the grant of the new lease.
How do I get started?
You may have already approached your landlord for a quote to extend the lease. You may be unhappy with the price or want to check that the quote is fair. Or you may want a professional assessment of the premium with which to approach your landlord.
Initially then you will want a professional report that gives a valuation of the cost of the extension and that can be used as a basis in subsequent negotiations with the landlord. The same report can also be used if the matter goes to tribunal.
If you were to proceed under the Act then the formal procedure is started by the service of the Tenant's Notice on the landlord (the Tenant's Notice) and it then follows a prescribed route. Although this is the beginning of the formal process for acquiring the ninety year extension, it should follow a period of preparation to ensure that you are fully equipped and advised to complete the acquisition. There is a substantial amount of work to be completed before you start.
- Checking Eligibility (including identifying the "competent landlord")
- Selecting and instructing professional advisers
- Assessing the premium
- Establishing the Finance
- Gathering the Information
- Preparing the Notice
- Preparing for the subsequent procedures
What will we do?
We are professional valuers and we will carry out a valuation of the premium to be paid for the extension as required by legislation. This will take the form of an initial appraisal or full valuation report depending on your requirements. The figure we can provide comes from our experience of acting on behalf of leaseholders under the 1993 Act. It also comes from cases that have been brought before the Leasehold Valuation Tribunal.
We will also advise as to the procedures for applying for an extension under the Leasehold Reform Act and carry out all negotiations throughout this procedure.
In our experience there are four possible principal stages in advising clients;
- 1. Full valuation report being the detailed argued case for the figure we recommend be put in the notice and which would eventually form the basis of any experts report.
- 2. Negotiations with the freeholder or freeholder’s representatives in the hope of establishing a negotiated settlement and any further advice required in respect to the initial or counter notices.
- 3.Reference to the Leasehold Valuation Tribunal which will include the preparation of an Expert‘s Report providing counter submissions after exchange of Experts Reports and attendance at the Tribunal
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