Glossary of Leasehold Valuation Terms
Friday, 20th April 2012
Leasehold Valuations
Some of the terminology used when decribing a lease extension or freehold purchase can be a touch technical so we thought it would be a good idea to include them all together in this glossary. If there are any other definitions that you think will be of use to include drop us a line and we’ll update our list.
| The ‘Act’ | The Leasehold Reform Housing & Urban Development Act 1993. |
| Counter Notice | Following the service of a notice by the Leaseholder, the Freeholder, often via his solicitor must respond with a counter notice within 2 months. This will either agree or dispute the terms of the notice or in most instances the premium to be paid. |
| Freehold Enfranchisement | The process where the Leaseholders of a block of flats acquire the freehold from the Freeholder. Any participant under this process will ultimately be in possession of a property with a ‘share of freehold’. |
| First Tier Tribunal | Is a statutory body that settles disputes between Leaseholders and Freeholders if neither side can agree the issue at hand, most often the premium to be paid. The mechanism is only really employed as a last resort is both parties are in disagreement or if one is acting particularly unreasonably. |
| Ground Rent | A sum of money paid annually to the freeholder from the leaseholder. Most leases have provisions for this sum to rise, often at each 33 year interval on a 99 year lease. |
| Landlord | Generally referred to as the Freeholder, but is technically an owner of a legal property interest greater than someone else’s. |
| Lease extension | Technically if ‘extending’ under the Act the lessee actually acquires a new lease equal to the current remaining term plus 90 years. The ground rent will revert to a peppercorn rate. |
| Lessee | The owner of a leasehold interest. |
| Lessor | The owner of a superior or greater interest, who lets the property to the lessee. Often the Freeholder. |
| Marriage Value | The additional premium that is applied when a lease falls below 80 years. When a new lease is granted under the Act the value of that property will subsequently increase. The Act states that this should be split equally between the Leaseholder and Freeholder. |
| Notice | The serving of a notice from the Leaseholder on the Freeholder starts the formal process of either acquiring a new lease or enfranchising. |
| Peppercorn Rate | Under the terms of the Act a new lease will include a provision for the Leaseholder’s ground rent to revert to a peppercorn rate meaning nil or zero. |
| Premium | The monetary value for acquiring a new lease or enfranchising, payable to the Freeholder. |
| Relativity | Is expressed as a percentage and is the difference between the value of the property with its current lease against its value with a long lease. |
| Reversion | In theory, at the expiration of a lease, the title will revert back to the possession of the Freeholder. The calculation used to arrive at an appropriate premium places a value on this eventuality. |
| Right of first refusal | If the Freeholder wishes to sell the freehold of a block to a third party, he must firstly offer the sale to the current Leaseholders. |
| Tenant | Another definition for Leaseholder. |
| Term | Refers to a period of years e.g. ground rent at £100 for the first 33 year term, £200 for the second and £300 for the final 33 year term of a 99 year lease (which again can be referred to as a term). |
