You are the freeholder or intermediate leaseholder of a block of flats and want to know what premium you will receive from your tenant or their purchaser for an extension of their lease?
You have established your tenant satisfies the qualifying criteria and they, or their purchaser can obtain a statutory 90 year extension of the lease, under the Leasehold Reform, Housing and Urban Development Act 1993. See Can my tenant or their purchaser extend the lease? You may have received a section 42 Notice from your tenant which specifies the date by which you must respond with a Counter-Notice.
The following describes how the premium is calculated:
What premium will I receive? Method of calculation.
The premium you will receive comprises the parts of the sum of the following that relate to your interest as a result of the extension:
- Diminution in the value of the interests in the flat of the competent landlord, and any intermediate landlords (loss of ground rent, and deferment of the reversion);
- 50% of the marriage value arising, if the lease currently has less than 80 years unexpired (the sum of the interests of the competent landlord, lessee and any intermediate leaseholders after the extension of the lease, less the sum of their interests before extension); and
- Compensation for any loss in the value of other property owned by the competent landlord or any intermediate leaseholders, including the loss of any development value.
In addition to paying the premium, the lessee or their purchaser is required to pay the reasonable legal and valuation costs of the competent landlord and any intermediate leaseholders.
What premium will I receive? Process to calculate.
In order to calculate the premium, and your share of it, we as Chartered Surveyors, Regulated by RICS, with Registered Valuers that are experts in lease extensions and enfranchisement can:
- inspect the flat;
- calculate the floor area;
- research the market; and
- value the flat 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 premium, and figures for the Counter-Notice, we take account of the terms of the qualifying lease, deeds of variation, licences for alterations and any other documents of relevance. If there is an intermediate lease, we advise on the implications, including whether the interest in the flat is a Minor Intermediate Leasehold Interest (‘MILI’).
What premium will I receive? Negotiations.
After reporting, we attempt to negotiate the premium with the tenant’s 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 premium will I receive? Examples of our recent work.
We have recently:
- Lease Extension: Negotiated a lease extension of a flat on a voluntary basis, so that the purchaser entered into agreement, that upon exchange of contracts, the freeholder became contractually bound to grant a 90 year extension, upon simultaneous receipt of the premium, transfer, and completion of the lease.
- Quantified increase in premium arising from solicitor’s negligence: Reported on the premium likely to be receivable for a voluntary lease extension, to avoid the purchasers having to wait a period of two years from the date their purchase is registered, due to the prior Deemed Withdrawal of a Claim, arising from a negligent solicitor failing to correctly assign the Benefit of the Notice of Claim.
- Lease Extension and variation of lease: Reported on the premium likely to be receivable for the extension of a lease, including advising that an undersized parking space is demised, the further premium likely to be obtainable for varying the lease to demise a standard size space, and on the terms to be quoted for such variation, and counter-proposed for the lease extension.
Our services: We are able to advise you on the premium you are likely to receive from the extension of a lease or leases of flats in a block where you are either the freeholder or intermediate leaseholder. If you have received a section 42 Notice under the 1993 Act, or a copy of one, we are also able to advise on the figures for the Competent Landlord to insert in a Counter-Notice, to be served no later than the date specified 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 premium will I receive?
