This is a question that is asked from time to time, so it made sense to reveal a little detail on that subject. Peter Barry’s Leasehold Calculator launched in 2017 and allows the user to input some basic information which returns an estimated premium range for a statutory 90 year lease extension.
The short answer is that it is very useful in its purpose to provide an estimate or an indication of the premium payable and by that measure is very accurate. This accuracy however relies on the user entering realistic and correct data.
The Market Value input relies on the user having a reasonable idea as to what their flat, on a long lease, is worth. They may be aware of sales of similar properties in the block or road, but a useful tool is Rightmove House Prices, where a history of sales are listed:
The number of years remaining is simple to find after a review of the lease as is the ground rent that is currently being paid.
On the basis that the user inputs a long lease value that is within £20,000 of what it should be, I would estimate that 90% of the ranges that are produced are accurate when compared to the reported figure.
Behind the webpage is the same calculator that is used by your Valuer when they work on your report. The resulting range takes the singular figure produced by that calculator and gives the user a range.
One of the key inputs, the relativity percentage, has changed a number of times since 2017 as case law alters the most commonly adopted position. Unfortunately for leaseholders, the swing has been in favour of their freeholders who have fought for some big wins in the Upper Tribunal and Court of Appeal.
For those of you who are more technically minded we adopt the following inputs:
First of all, an estimate is only an estimate, most useful to determine roughly whether you have the finance to proceed with your lease extension in the first place.
Second, the strength of your negotiation position will depend on the evidence behind it and you do not get that with a few minutes on our estimate calculator. Your freeholder will put forward an initial offer that is typically 20%-40% higher than what you should reasonably pay.
If it is reasonable to pay £35,000-£40,000, you can bet that you will be offered £45,000-£50,000. You will need your Valuer’s report to counter such figures.
You and your Valuer will need to present sales evidence to justify the long lease value of the flat and case law to support all the key inputs that affect the reversion, capitalisation and relativity rates. Finally, you will need to know what figure to either open your negotiations at or serve formal S42 notice. Your report will contain these justifications and recommendations.
You can only enter 1 ground rent figure for the estimate calculator. It does not take into account rising rents, or those linked to RPI or the flat’s value.
We have undertaken numerous valuations for clients with aggressive ground rents, with many having received offers for revised rent schedules from their freeholder. It is only with an expert report that they can confirm what is reasonable and make an informed decision.
If you are interested in extending your lease, please have a go on our calculator to see what you might pay and then their phone or email us for a free quote. Many of our clients chose our desktop option, for value for money and speed but we do of course undertake inspections when it is warranted.