Lease Extension - Relativity

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    Lease Extension - Relativity

    Hoping to get some clarification,

    If a flat (Outside Greater London) with 60 years left is sold for £110,000 and comparable properties with longer leases attain £160,000

    What is the relativity in this case?

    Would it be £110000 less 5.5% (to estimate for no act rights) = £103950, divided by Long lease value of £160000 = 65%?

    According to the Gerald Eve graph the proxy is 81%

    So why such a large difference?

    Because it is a highly complicated subject and only the finest brains in the land can grapple with the subject - that is what the valuers will say .

    Gerald eve graph is highly respected and is one of the many that the Tribunal will rely on

    it is interesting that if you discount the reversion by 4% in most cases marriage value more or less disappears - the government in its desire to make the calculation easier quicker and cheaper have commited to abolishing marriage value - but a long overdue correction is required to the deferment rate and I can’t help thinking that lowering to 4% will appease the vested interest groups and deliver a quicker way to calculate the premium and save the lessee costs - so delivering in a promise but not as generous as first thought to lessees


      I for one would appreciate a more stable approach in deriving the premium...

      In this instance what would

      1. The sensible premium be?

      A)£32000 (based on the value the actual short lease was just sold for i.e Relativity 65%)
      B)£20,000 (based on graph evidence from wider studies i.e. Relativity roughly 80%)

      2.If it went to tribunal i presume they would lean more towards actual evidence (although not sure evidence of a single local sale is enough)?


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