Lease Extension Valuation - Question RE how long v price

Hibiscouscous

I am a freeholder, my leaseholder has 92 years left on his lease.

We agreed a price to increase his lease by £100 years.

He is now mentioning the leasehold reform so wants to extend it to 990 years.

I am fine with this, I want to do everything correctly and appreciate why he'd want that.

My question is, would the price we agreed remain the same or would it potentially be a bit higher as he would be getting a much longer lease?

Thank you!

Tracet74

The legislation which includes extending a lease to 990 years is not in force yet.

Hibiscouscous

Yes I’m aware of that, but I suppose either way as a freeholder/ landlord I want to do right by my leaseholder and be fair to him.

I think the valuation we have for the extension is fair, £14,000 for a 1 bed flat in London with ground rent of 150 per annum.

just trying to work out if we did extend to 990 years that valuation would remain fair or need to be increased.

eddddy

Hibiscouscous said:

I think the valuation we have for the extension is fair, £14,000 for a 1 bed flat in London with ground rent of 150 per annum.

Presumably, the ground rent is fixed (not escalating) and you're reducing the ground rent to zero.

Out of interest, where did the £14k valuation come from? Using the statutory formula, that suggests the flat is worth about £1m. Is that about right?


So assuming that the flat is worth £1m, 990 years vs 192 years should increase the cost of the lease extension by about £100 (based on the statutory formula). So not much in it.