Lease Extension for Housing Association

Independent lease extension valuation advice relating to a flat in Brighton

On the instructions of a housing association, a valuation for a lease extension was required. We understand that the extension was to proceed on an informal basis albeit on the same lease terms as the statutory framework. Under the legislation; namely the Leasehold Reform, Housing and Urban Development Act 1993 (as amended), a lessee is able to obtain a 90-year lease extension to their unexpired term at no ground rent.

The Housing Group had set up an informal lease extension process that was open to all lessees regardless of whether they had “staircased” to full ownership. The process involved the preparation of an independent valuation, which would calculate the premium and would be accepted by both parties and would not be the subject of challenge / negotiation.

The subject property comprised a 2 bedroom flat located on the raised ground floor flat of a period conversion. The property was presented in good order having been the subject of recent refurbishment. The flat had a gross internal floor area of 535sqft with access to a rear garden which incorporated a summer house.

Following the inspection and our study of the lease plan, it was clear that the property had been the subject of re-modelling to create a second bedroom.  Furthermore, the lease plan showed that the garden was not in fact demised albeit that the lessee of the subject flat was the only occupier within the building which enjoyed direct access.

These issues were raised with the Housing Group who confirmed that consent in the form of a licence to alter had been granted for the internal re-configuration and construction of the summer house.

Our planning enquiries confirmed that conditional consent had been granted for the internal works and summer house.

In accordance with the statutory valuation methodology (namely to value the property on the assumption that it is kept in repair but disregards value attributable to tenant’s improvements), the flat had to be valued based on its original configuration as a one bedroom flat.  Any value attributable to the summerhouse was also ignored within the calculation. A value was however attributed for the use and enjoyment of the rear garden which although not demised by the lessee was the only flat in the building which had any form of access.

The lease of the subject flat had an unexpired term of approximately 69 years, meaning that marriage value was applicable to the valuation. A paucity of short lease sales of similar properties meant that various graphs of relativity were utilised in applying a suitable relativity (expressed as a percentage)  between the value of the current leasehold interest and the freehold unimproved value. The firm adopted an average of Nesbitt and Pridell’s relativities and this valuation approach conformed with a number of recent First Tier Tribunal decisions.  There was no ground rent payable under the current lease so this did not impact the premium.

A premium of £12,800 of calculated Following additional instructions and under separate cover, further advice was provided regarding a suitable price to the paid by the leaseholder to formally acquire the rear garden.