VALUATION OF LEASEHOLD EXTENSIONS



  1. How is the Lease Extension valued?
  2. Why is the Freeholder's valuation higher than my own?
  3. Pro-Leagle Valuation Service
How is the Lease Extension valued?
  • The Freehold is calculated using several key pieces of information. These include:
  1. Your ground rent per year.
  2. How many years you have left to run on your lease.
  3. The area in which the property is located.
  • Under Schedule 6, Part II of the Leasehold Reform, Housing and Urban Development Act 1993, the cost of the Lease Extension is comprised of the following:
  1. Value of the Freeholders Interest:
    COMPENSATION to the Freeholder for having to wait another 90 years to reacquire your flat.
  2. Marriage Value:
    PAYMENT to the Freeholder for any increase in your flat's marketability as a result of the lease extension. In legal terms, this is called the 'Marriage Value' and is calculated at 50% of the flat's increase in market value after Lease Extension. This is only payable if the lease has less than 80 years to run.
  • The Freeholder has the right to obtain his or her own valuation and access the property should be granted for this purpose. The Freeholder should however give ten or more days notice of their intention.

Why is the Freeholder's valuation higher than my own?
  • You may find that the valuation provided by the Freeholder's surveyor is higher than your own. What are the reasons for this?
  1. Yield Rate: the value of the future ground rent owed to the freeholder is amalgamated into a lump sum which constitutes part of the cost of the Lease Extension. This is done by discounting the future ground rent by a percentage value known as the 'yield rate'.
    - The level of the discount is determined principally by the area in which your property is located.
    - The yield rate is a subjective value determined by a surveyor with a knowledge of the local area and past experience of similar transactions. Due to it's subjective nature, different surveyors will often produce different yield rates.

  2. Percentage Increase in Value: depending on the area of your property and the length of the remaining lease, it is likely that your property will increase in value after Lease Extension.
    - Part of the cost of Lease Extension is intended to share this profit with the freeholder. The expected size of the increase is again subjective. Different surveyors will often provide different opinions.

Pro-Leagle Valuation Service
  • Pro-Leagle provides an initial valuation service. Our Lease Extension valuations are based upon yield rates, and percentage value increases imposed by the Leasehold Valuation Tribunal (LVT). The LVT is the body responsible for deciding leasehold issues in England and Wales. A Pro-Leagle valuation hence represents the fair price you would expect to pay were the Lease Extension contested at the LVT.