You are the leaseholder of purchaser of a flat and want to know what price you and other leaseholders will have to pay to enfranchise the block?
You have established you satisfy the qualifying criteria and can enfranchise the block, under the Leasehold Reform, Housing and Urban Development Act 1993. See Can we enfranchise our block? You are contemplating serving a section 13 Notice, and need advice on the price, and figures to insert in the Notice.
The following describes how the price is calculated:
What price will we have to pay for the block? Method of calculation.
The price you will have to pay comprises the sum of the following as a result of the enfranchisement:
- Diminution in the value of the interest in the block of the freeholder and any intermediate leaseholders (loss of ground rent, the reversions, other income, and development potential etc);
- 50% of the marriage value arising for participants with leases having less than 80 years unexpired (the sum of the interests of the freeholder, any intermediate leaseholders, and leaseholders for participants with leases currently having less than 80 years unexpired after enfranchisement, less the sum of their interests before enfranchisement);
- Hope Value for the prospect of receiving future premiums from the extension of the leases of the flats held by the non-participants; and
- Compensation for any loss in the value of other property owned by the freeholder or any intermediate leaseholders, including the loss of any development value.
In addition to paying the price, the participants are required to pay the reasonable legal and valuation costs of the freeholder and any intermediate leaseholders.
What price will we have to pay for the block? Process to calculate.
In order to calculate the price, we as Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement can:
- inspect the flats;
- calculate the floor areas;
- research the market; and
- value the flats on the lease term existing, extended and with 999 years unexpired and a share of the freehold, all excluding the benefit of the 1993 Act, and the amount improvements have added to value.
In preparing our calculations, report on the price, and figures for the section 13 Notice, we take account of the terms of the leases, deeds of variation, licences for alterations and any other documents of relevance. If there is an intermediate lease, we advise on the implications, including those if it is a Minor Intermediate Leasehold Interest (‘MILI’).
What price will we have to pay for the block? Negotiations.
After reporting, we attempt to negotiate the price with the tenants’ valuer, to save you the expense and risks of a First Tier Tribunal (Property Chamber) hearing, with possible appeal to the Upper Tribunal (Lands Chamber).
If negotiations do not progress so we can recommend settlement, we provide a Cost Benefit Analyses to assess the sense of proceeding with a hearing in the First Tier Tribunal (Property Chamber), or if the case is subsequently appealed, in the Upper Tribunal (Lands Chamber).
If a decision is taken to proceed to tribunal, we prepare and give expert evidence at the hearing, after which the tribunal will issue their determination.
What price will we have to pay for the block? Examples of our recent work.
We have recently:
Enfranchisement of Block: Reported to the lessees and negotiated the enfranchisement of a block of 97 flats, including the valuation of eleven intermediate interests, development potential, income from radio masts, and rights to install further masts.
Enfranchisement of Block: Reported to the lessees and negotiated the enfranchisement of a block of 6 flats.
Strategic valuation advice and later negotiation of sale of freehold: Reported to Administrators that, in order to obtain a share of marriage value, they should wait until the leases in a block had less than eighty years unexpired, before entering into negotiations so sell the freehold to the lessees on a voluntary basis. Subsequently negotiated with the lessees, the price and other terms for the sale of the freehold.
Negligent Solicitor: Advised on, and negotiated the damages arising from the freeholder’s solicitor failing to serve a valid enfranchisement Counter-Notice.
Mediation: Produced a report for solicitors acting for the client solicitors and their insurers to assist reaching agreement of damages arising from the need to serve a fresh Notice of Claim due to the client solicitor’s negligence in failing to make an application in time for a block enfranchisement case to be determined by a First Tier Tribunal.
Our services: We are able to advise you on the price you are likely to have to pay for enfranchisement of a block where you are either a leaseholder or purchaser. If you are contemplating serving a section 13 Notice under the 1993 Act, we are able to advise on the likely price and figures for insertion in the Notice. We are Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement. We are also able to provide further information to answer What price will we have to pay for the block?
