Landlord and Tenant – Level 2 Flashcards
• Talk me through your rental valuation of 121 Green Street.
- I assisted a colleague of checking the comparables that were listedd in thhe trial with the landlords Surveyor.
- I have assisted a colleague in carrying out a rental valuation on behalf of the tenant’s premises. There was a substantial difference between landlords and tenants’ rental valuations.
- The matter went to the Royal Courts of Justice whereby I assisted in the preparation of a compliant rental valuation report for the court and in the detailed analysis of all comparable valuations.
- I also assisted from an administrative point of view in attending court and assisting with the production of the appropriate valuation paperwork as Mr Gibson had to take his own case by hot tubbing.
• Give me some examples of service charge clauses and how these could impact both landlord and tenant.
- Unable to sell.
- Increase the cost of an enfranchisement claim.
- Potentially not mortgageable.
• 62a Whalebone - What do you mean by carrying out the cost of a lease extension? How did you do this?
A client asked me to provide a valuation as to the likely cost to extend a lease by a further 90 years under the Leasehold Reform Housing and Development Act 1993 as the subject property has a short lease.
Lease details: 99 years from 1975.
Ground Rent £25 for 1st 33 years £50 for next 33 years and £75 for maining 33 years.
Unexpired term is 53 years.
I did this by the following way:
- Work out the market value with an extended lease by comparison and checking on lease details from Land Registry.
Diminuition in value of Landlords Present Interest:
- Freehold Interest.
- Ground rent of £50 capitalised by YP 20 years (remianing) @ 6%
- Ground Rent next tranch at £75 capitalised for 33 years @ 6%
- PV £1 as deferred for 20 years @ 6%
Plus
- Reversion to property in 2074 @ £170,000 (maket value with long lease).
- PV £1 53 deferred 53 years @ 5% on £170,000.
- Plus Value of Landlords Proposed interest @ Peppercorn ground rent
- Less reversion to vacant possession value Deferred for 143 years @ 5%
Landlords Share of marriage value
Proposed Interest
Value of extended lease = £170,000
Plus Landlords interest after grant of new lease.
Value with existing lease (79.8% relativity graph
Present Interest
Landlords interest before grant of new lease = £13,712.35
Tenants present interest = £135,660
Values before grant of new lease = £149,372
Therefore Proposed Interest less Present interest = Marriage Value
Marriage value at 50%
So Marriage Value plus landlords interest subject to existing lease = Value of extending the lease
• What is a Section 42 Notice?
- A section 42 notice is where the leaseholder serves the freeholder a notice to extend the lease for 90 years at a peppercorn ground rent.
- The leaseholder has to have been at the property for at least 2 years with a lease in excess of 21 years and the property is not commercial.
• Give me an example of an onerous lease term?
- A lease with a doubling ground rent provision say every 10 years.
- An onerous lease provision will make it hard to sell the property.
• Give me an example of when you have served a notice?
- When bringing all my AST tenancies to an end at the end of their term. I serve a notice under Section 21 (prior to covid) of no less than 2 months’ notice and not before 4 months.
Explain how you did this for 62a Whalebone Lane South, Dagenham, RM8 1BB
I was instructed to carry out the cost of a lease extension on the above property which was being purchased at Auction with the benefit of a notice under Section 42 of the Landlord Reform Housing and Urban Development Act 1993.
- Lease 99 years from 25th March 1975
- Ground Rent £25 for 1st 33 years, £50 for next 33 years and £75 for remainder.
I did this by the following way:
Work out the market value with an extended lease by comparison and checking on lease details from Land Registry.
Diminuition in value of Landlords Present Interest:
Freehold Interest.
Ground rent of £50 capitalised by YP 20 years (remianing) @ 6%
Ground Rent next tranch at £75 capitalised for 33 years @ 6%
PV £1 as deferred for 20 years @ 6%
Plus
Reversion to property in 2074 @ £170,000 (maket value with long lease).
PV £1 53 deferred 53 years @ 5% on £170,000.
Plus Value of Landlords Proposed interest @ Peppercorn ground rent
Less reversion to vacant possession value Deferred for 143 years @ 5%
Landlords Share of marriage value
Proposed Interest
Value of extended lease = £170,000
Plus Landlords interest after grant of new lease.
Value of tenants interest with existing lease (79.8% relativity graph
Present Interest
Landlords interest before grant of new lease = £13,712.35
Tenants present interest = £135,660 (based upon relativity %)
Values before grant of new lease = £149,372
Therefore Proposed Interest less Present interest = Marriage Value
Marriage value at 50%
So Marriage Value plus landlords interest subject to existing lease = Value of extending the lease
What RICS Guidance/Acts did you follow for
121 Green Street
62a Whalebone Lane South, Dagenham
-
121 Green Street
- Landlord and Tenant Act 1954
-
62a Whalebone Lane South
- RICS Comparable evidence in real estate valuation
- RICS Professional Statement - Property measurement standards 2nd Edition
- Leasehold Reform Housing and Urban Development Act 1993
- RICS Guidance Note - Leasehold Reform in England and Wales
What were the comparables for 121 Green Street?
- 66 Green Street - £47 per Sq Ft ITZA
- 74 Green Street - £45.57 per sq ft ITZA
- 125 Green Street - £45.95 per sq ft ITZA
- 135 Green Street - £44.88 per sq ft ITZA
- 166/168 Green Street - £49.26 per sq ft ITZA
What were the price ranges within green street?
What price was agreed in 2009 to 121 Green Street?
What price is the Landlords Surveyors stating prices had increased to?
- The ITZA prices ranged from £45 - £49 per square foot.
- In 2009 an ITZA price of £48 was agreed between both parties.
- The landlords surveyor had stated that peremiums would be paid and that prrices had increased to £70 per square feet.
- So an increse of almost 49%.
What were the disagreements in relation to the comparables for 121 Green Street?
- 66 Green Street - Not an inferior position as within a core block and similkar trading position - 10 years remaining with no rent review and a passing rent.
- 74 Greenn Street - Shop with Basement - Not inferior position. £45 sq ft shop and £2 sq ft basement = £48 sq ft.
- 125 Green Street - Stated rent was wrong as it has been reduced. Also a user clause of A3 to A1 so allowed 20% deduction from the rent.
- 135 Green Street - Disagreed floor area. - Return frontage - Basement with full height. Unit also split into four units.
- 166/168 - Disagreed floor areas. - Shop with Basement. - Property on market for over 3 years.
Explain in lay-mans terms how you carry out a leasehold extension valuation under the Leasehold Reform Housing and Urban developments Act 1993?
- Ascertain the Market Value with An extended Lease.
- then work out the Diminution of the Landlords Interest which is:
- Landlords interst subject to existing lease (Capitalisation of the ground rent or ground rents)
- plus
- Reversion to vacant possession value which is defered for x remaining years
- plus
- Value of Landlords interest subject to the new lease.
- Ground Rent at Peppercorrn
- Plus
- reversion to vacant possession value deffered for x years plus 90 years @ 5%
- = Diminution in the value of landlords interest.
Landlords share of marriage value:
Proposed interest:
Landlords interest after new lease
plus
Tenants interest after grant of new lease (vacant possession value)
Present Interest:
Landlords interest before grant of new lease.
plus
Tenant interest before new lease (relativity value)
= Proposed Interest less Present Interest @ 50%
Marriage Value:
Sums of Diminution of Landlords Interest plus 50% marriage Value = Cost of lease extension
Explain in lay-mans terms how you carry out a leasehold extension valuation under the Leasehold Reform Housing and Urban developments Act 1993?
- Ascertain the Market Value with An extended Lease.
- then work out the Diminution of the Landlords Interest which is:
- Landlords interst subject to existing lease (Capitalisation of the ground rent or ground rents)
- plus
- Reversion to vacant possession value which is defered for x remaining years
- plus
- Value of Landlords interest subject to the new lease.
- Ground Rent at Peppercorrn
- Plus
- reversion to vacant possession value deffered for x years plus 90 years @ 5%
- = Diminution in the value of landlords interest.
Landlords share of marriage value:
Proposed interest:
Landlords interest after new lease
plus
Tenants interest after grant of new lease (vacant possession value)
Present Interest:
Landlords interest before grant of new lease.
plus
Tenant interest before new lease (relativity value)
= Proposed Interest less Present Interest @ 50%
Marriage Value:
Sums of Diminution of Landlords Interest plus 50% marriage Value = Cost of lease extension
Explain in lay-mans terms how you carry out a leasehold extension valuation under the Leasehold Reform Housing and Urban developments Act 1993?
- Ascertain the Market Value with An extended Lease.
- then work out the Diminution of the Landlords Interest which is:
- Landlords interst subject to existing lease (Capitalisation of the ground rent or ground rents)
- plus
- Reversion to vacant possession value which is defered for x remaining years
- plus
- Value of Landlords interest subject to the new lease.
- Ground Rent at Peppercorrn
- Plus
- reversion to vacant possession value deffered for x years plus 90 years @ 5%
- = Diminution in the value of landlords interest.
Landlords share of marriage value:
Proposed interest:
Landlords interest after new lease
plus
Tenants interest after grant of new lease (vacant possession value)
Present Interest:
Landlords interest before grant of new lease.
plus
Tenant interest before new lease (relativity value)
= Proposed Interest less Present Interest @ 50%
Marriage Value:
Sums of Diminution of Landlords Interest plus 50% marriage Value = Cost of lease extension
What is a Section 25 Notice L&T Act 1954?
- A notice that the Landlord serves on the tenant to either renew or not renew the tenancy.
