SHAW & COMPANY

CHARTERED SURVEYORS

Lease Extension / Collective Enfranchisement Valuation

What are they?

Lease Extensions – The value of a leasehold property reduces as the lease runs shorter and leaseholders often need to extend them in order to safeguard the value of their asset. This typically occurs when a lease is already quite short or where it is approaching 80 years unexpired.

Collective Enfranchisement – This is the process of leaseholders banding together and serving a statutory notice onto the freeholder to compulsorily purchase the freehold interest in the building for a reasonable price.

Other: Right of First Refusal, Freehold Valuation – If freeholders of residential blocks choose to dispose of their reversionary freehold asset, they are usually required under legislation to offer leaseholders the right of first refusal. Other situations require freeholds to be valued for accounts purposes.

Why is a premium paid to extend or enfranchise?

The premium represents the freeholders loss in value as a result of the lease extension or enfranchisement. This mainly consists of:

Loss of Ground Rent – The lessee is entitled to a peppercorn ground rent under a Statutory Lease Extension. The loss of the existing income stream is therefore quantified using an appropriate capitalisation rate.
Reversionary Loss – The freeholder under the existing lease length would (in theory) receive the property back with vacant possession upon expiry. The value of this right diminishes when the lease is extended.
Marriage Value – This is the overall value uplift that the freehold and leasehold interest increases by, as a result of the lease extension and is to be split 50:50 between the parties.
Costs – The freeholder is entitled to recover from the lessee their reasonable legal and valuation costs brought about as a result of the claim.

Interested in extending your lease or purchasing the freehold of your property?

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What is the process to extend the lease or collectively enfranchise?

A valuer is appointed and an inspection of the property is carried out.

Step 01

The valuation report is issued to the client and their solicitor.

Step 02

Lessee’s solicitor serves the relevant notice giving Landlord 2 months to respond.

Step 03

The landlord has a valuation prepared and responds to the lessee the relevant counter notice (often at a higher proposed premium).

Step 04

The parties then have 6 months from the date of the counter notice to negotiate the matter before the lessee must apply to the Tribunal to have the matter determined.

Step 05

Tribunal Hearing determines appropriate premium based on valuation evidence submitted and heard by the parties experts.

Step 06

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Our Services

Shaw and Company strive to offer high quality professional advice at a competitive cost and will aim to price match any like for like competitive quote where possible. Contact us for a free no obligation quotation.

How can Shaw & Company help?

Shaw and Company are a firm of Chartered Surveyors and RICS Registered Valuers, who have extensive experience in this niche field of property valuation and can provide the following:

A complete package of support for Clients with the preparation of the initial valuation report, negotiations with the opposing parties and representation at Tribunal if necessary.
Act for either leaseholders or freeholders in such matters (provided a conflict of interest does not arise).
Offer Clients strategic advice on the appropriate approach and also provide the Client with valuation figures for best and worst case scenarios.

* Free informal valuation advice for Property Managers or Clients

The Surveying team are happy to offer free informal valuation advice for Property Managers or Clients who have questions on this or any other valuation topic.