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/ by Steven Harding

Lease extensions: Why an online calculator may not be the best option

Of all residential dwellings in England nearly one in five properties (18%) are leasehold. This equates to 4.2m homes where the leaseholder is the owner of a diminishing asset.

The scale of leasehold is even more exaggerated in London where a third of all England’s leasehold property can be found[i]1.4m residential dwellings.

While leasehold reform is firmly on the government’s agenda, it will take time to change a system so embedded in the property market. In the meantime, as leases run down, the resale value of the leasehold can fall.

There are nearly half a million homes in London where leases have less than 80 years remaining[ii] – the point at which the cost of renewal starts to escalate.

It’s therefore vital leaseholders understand the remaining length of their lease, how much it is likely to cost to extend, and what value will be added to the leasehold once extended.

On-line calculators are a useful tool for assessing lease extension premiums for simple leases, however, the use of a Chartered Valuer for assessing premiums cannot be underestimated.

Why use a Chartered Valuer?

  • While some inputs of an on-line calculator will be known, other important factors will not be, and it might prove difficult to use such calculators when conducting price negotiations with the freeholder.
  • On-line calculators are not adept at addressing legislative changes and nuances regarding location such as distinguishing what is and isn't a Prime Central London location.
  • The capital value input made by the leaseholder may ultimately end up being incorrect, especially where the condition of the property or any leaseholder improvements could be discounted.
  • A lease extension valuer may need to be instructed anyway – at the leaseholder’s cost – if negotiations are required following a premium offer based on an on-line calculation
  • An experienced valuer will provide the leaseholder with the lowest justifiable premium offer price.
  • An experienced valuer may also have experience of negotiations with the freeholder and/or evidence of other lease extension premium settlements or on-going claims. Consequently the valuer might be able to provide additional advice to the tenant on how their claim might proceed.

To speak to a Chartered Valuer regarding your leasehold or if you have any questions regarding leasehold extensions, get in touch with our Chartered Surveying team.

 

 

[i] https://www.leaseholdknowledge.com/number-leasehold-homes-double-figure-government-believes-according-lkp

[ii] https://www.theguardian.com/money/2018/jan/14/property-market-braces-for-shockwaves-from-landmark-leasehold-case

About our expert View all posts by this expert

Lease Extensions Expert
Steven Harding General Practice Surveyor at KFH at KFH Group
Steven joined KFH in 2004 as a Chartered Surveyor preparing mortgage valuations on behalf of high street lenders and has been undertaking leasehold reform work since 2008. Steven is a senior valuer in our general practice department and often acts as an expert witness on a wide variety of residential valuation issues. Steven lives in Raynes Park with his family and in his spare time, enjoys playing squash.

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