Lease extension valuation and negotiation

Under a number of Acts of Parliament including the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, as amended by the Commonhold and Leasehold Reform Act 2002, owners of leasehold residential property have rights to extend their lease term.

Under the Leasehold Reform, Housing and Urban Development Act 1993, if you have owned your flat for at least two years you may be entitled to extend your lease, this extension being for a term of 90 years plus the unexpired term of your existing lease. This right is available whether or not the leaseholder is resident in the property.

Historically most older residential leases were granted for between 99 and 125 years. At the expiration of the lease ownership of the property would revert to the freeholder. This situation is usually avoided by the purchase of a lease extension from the freeholder, the price paid reflecting the loss of that reversionary value, future ground rent income and, where the remaining lease term is below 80 years, marriage value. Marriage value recognises the increase in the value of the property arising from the grant of a new lease. Under the terms of the Act this value is divided equally between the parties. The Lessee must pay the freeholder's legal and valuation costs.

If the parties can not agree the value then the matter can be referred to the Leasehold Valuation Tribunal.

It will be clear from the above that both parties will need specialist advice to determine their best course of action. We have been acting in these cases for several years and have built up a substantial base of knowledge on the valuation principles required to assist both Freeholders and Leaseholders.

If you wish to investigate the possibility of extending your lease term, or if your landlord has already quoted a figure for extending, make sure you get professional advice to ensure that the terms are fair.