Factors Affecting Your Freehold Valuation

Pro-Leagle takes all of these factors into account when assessing the value of your freehold. You can purchase a Pro-Leagle valuation through our services section.

The Ground Rent

Ground rent is a fee you have to pay to your Freeholder under your lease. It is usually a small amount, such as £100 or £200 a year.
When purchasing the freehold you must compensate the Freeholder for their loss of future ground rent earnings. In order to do this the future ground rent owed to the Freeholder is amalgamated into a lump sum constituting part of the cost of the freehold purchase.
In 70-80 years time, a ground rent payment of £100 will be worth much less in real terms due to general inflation. Future ground rent is hence discounted using a percentage value known as the 'Yield Rate'. The Yield Rate is determined principally by the area in which you live although recent court cases have had an impact on the overall levels of yield rates.

The Freeholder must be compensated for the loss of future ground rent for each year remaining on the lease.

At the end of your lease, ownership of your property reverts to the Freeholder. Once you have purchased the freehold this will no longer happen. The Freeholder must be compensated for the future loss of the property. This compensation is known as the 'Freehold Reversion'.
If your lease has only a few years remaining, the value of the reversion will be higher. This is because the Freeholder expects to receive the property in the near future and must hence be compensated at a higher level for its loss.
Banks and Building Societies may not provide mortgages on properties with leases of less than 70 years. This is because the value of the Freehold Reversion increases substantially with time and the property is less of a secure asset for the banks to loan against.

Once your lease has less than 80 years remaining, the increase in the value of your property caused by purchasing the freehold must be shared 50:50 with the current freehold owner. This charge is known as 'Marriage Value'.

The value of your property will increase once you have purchased the freehold. This is because ownership of the leased property and land on which it is situated are now combined. The value of your property will no longer decline as the remaining length of the lease decreases.
Full control of management rights gives a perceived advantage in the property market where unscrupulous managing agents or Freeholders can make life difficult for long-leasehold property owners.
This improved value of your property after freehold purchase is used to calculate the Freehold Reversion discussed above. Hence, if your property has a high current value, you will pay more to purchase the freehold.

The amalgamated ground rent payable to your Freeholder on purchase of your freehold is partially determined by where you live.
If you live in prime, central London you will pay more than if you live in a commuter suburb. This is because rents from prime properties are considered more valuable and reliable than those from less exclusive properties.
The value of the Freehold Reversion is also determined in part by where you live. However, recent court cases have made a clear distinction between prime, central London and the rest of the UK.

When your purchase your freehold you must do so in collaboration with the owners of the remaining flats in your building. After the legal process of Collective Enfranchisement the entire freehold of the building will be transferred away from the current Freeholder. The Freeholder must therefore be compensated for loss of his interest in all of the flats.
If a leaseholder in your building does not take part, the cost of their contribution must be split amongst the leaseholders who do participate. The one exception is Marriage Value which is paid only for the participating flats. However, Freeholders have argued that the likelihood of non-participating flats seeking Lease Extensions in the future gives the freehold an additional 'Hope Value'.
Hope Value is often assessed as being half the landlord's share of the Marriage Value which would have applied had the relevant flat participated in the Collective Enfranchisement. The cost of Hope Value may vary significantly from this figure depending on the specific circumstances.

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