Glenny offers expert valuation advice on diminishing residential long leasehold interest

Recent cases at the Leasehold Valuation Tribunal have revealed that under certain circumstances different rental yields can be adopted; where ground rents are subject to significant uplift, a higher multiplier can be used. Glenny’s Valuation Services division recently witnessed this variance when advising a private leaseholder on a long lease flat that had 19 years left before lease expiry. Calculating the appropriate premium the leaseholder had to pay in order to be granted a 90 year lease extension, Glenny consulted the RICS Leasehold Reform Guidance Note and the Land Tribunal Decision to accurately calculate the appropriate capitalisation rate. The leaseholder had purchased the property two years prior, along with a Section 42 notice, provided by the seller. The Section 42 notice meant that the new leaseholder could begin the lease extension process without having to wait the allotted two years of ownership, as usually required by law under the 1993 Leasehold Reform, Housing and Urban Development Act. However, the application granted by the Section 42 notice failed to proceed and, during the two year period before Glenny was appointed to advise the leaseholder, house prices not only rose in the area, but the remaining lease length also diminished (it was 21 years at the time of purchase). Nick Davis, Divisional Partner in Glenny’s Valuation Services division, said: “When leaseholds on residential properties fall below 60 years, it becomes increasingly difficult for the leaseholder to obtain a conventional residential mortgage. “Negotiating an extension with the freeholder enhances the property’s ability to be mortgaged and increases its’s saleability, thus generating a premium for the freeholder. Typically, the longer the matter is left, the more expensive it is to extend the lease “The process can be relatively straight forward, but professional advice does need to be obtained from suitably experienced property experts as soon as possible to ensure the leaseholder is not financially disadvantaged.”