The process of valuation for a lease extension is comprised of several variable factors which are determined by the experience of the valuer, the data available at the time of valuation and published case law from the various tribunals and courts.
The first element to be determined is the freehold vacant possession value (FHVP). The preferred method to establish this element is to value the leasehold property as if it were freehold and then using either a relativity percentage or relevant transactional data to backwards calculate the value of the existing lease. It is commonly accepted that the difference in value between a leasehold property with 80 years or more to run and a freehold property is negligible, although an adjustment of 1% is often made to reflect the difference between a long lease and a freehold tenure.
In order to ascertain the FHVP, we must first ascertain the value of the property as if it were freehold for which we have used comparable evidence of the sales of recent similar property in the locality. This generally results in a range of values which are given within our report. However, the premium is established by a range of other factors which are generally determined by the valuer’s experience, case law and transactional data. These are summarised in the table under component parts.
The first element to be determined is the freehold vacant possession value (FHVP). The preferred method to establish this element is to value the leasehold property as if it were freehold and then using either a relativity percentage or relevant transactional data to backwards calculate the value of the existing lease. It is commonly accepted that the difference in value between a leasehold property with 80 years or more to run and a freehold property is negligible, although an adjustment of 1% is often made to reflect the difference between a long lease and a freehold tenure.
In order to ascertain the FHVP, we must first ascertain the value of the property as if it were freehold for which we have used comparable evidence of the sales of recent similar property in the locality. This generally results in a range of values which are given within our report. However, the premium is established by a range of other factors which are generally determined by the valuer’s experience, case law and transactional data. These are summarised in the table under component parts.