Leasehold Reform Act Flashcards
What are the key pieces of guidance and legislation around leasehold reform?
- Leasehold Reform (Housing and Urban Development) Act 1993 - flats
- LRA 1967 - houses
- LRA 2002 - increased comm. to 25%, valuation date at notice of claim, no marriage value over 80 years and landlord’s share at 50%
- Leasehold Reform in England and Wales, 3rd Edition (2015) - guidance note
Are LRA valuations subject to the Red Book?
No but valuers will require a high level of competence and PS 1 and PS 2 will still apply.
Specifically, the provisions around member qualification at Paragraph 2.1 which includes provisions for supervision by qualified members
What key elements make up the enfranchisement price?
- Diminution in value of the landlord’s interests
- 50% of marriage value
- Compensation for landlord’s other losses
What are the five valuations under the 1967 Act?
- Extended lease
- Section 9(1) - no marriage value
- Section 9(1A) - marriage value
- Section 9(1C) - like 9(1A) with compensation
- Section 9(1AA) - vacant possession value
How does the lease extension process work for houses?
Under the 1967 Act, tenants can exercise the right to extend their lease.
- Extends for 50 years
- Modern ground rent applies subject to review after 25 yrs
How is a modern ground rent calculated under Section 9(1) of the 67 Act?
- Establish an appropriate yield to decapitalise the site value
- Site value can be calculated using three methods:
1. Cleared site approach
2. Standing house approach
3. New for old approach
How do the different methods of calculating site value work?
Cleared site - used where the house is near the end of its life. Use comps of single plot sales. Difficult to find
Standing house - take a % of the FHVP. Some case law (Lewis vs James) and % depends on location. In Lewis vs James the tribunal decided 25%
New for Old - widely criticised as requires too many assumptions. Works like a residual valuation.
How do Section 9(1) valuations work in the 67 Act?
- Applies to low value houses
- It assumes the tenant has taken an extended lease
- Aggregate of: existing ground rent value, hypothetical modern ground rent value, hypothetical reversion value
Believe that the government has declared an intention is to keep this approach in any future legislation.
How does a Section 9(1A) valuation work?
- Applies to higher value houses and includes 50% of marriage value
- Value of existing ground rent
- Value of reversion
- 50% marriage value
How does a Section 9(1C) valuation work?
Follows same process as 9(1A) but also includes a provision for the payment of compensation.
Applies to houses that didn’t qualify until the 1993 Act amendments.
How does a Section 9(1AA) valuation work?
Same as 9(1A) but disregarding tenant improvements and any rights of an assured tenancy.
Applies to tenants who have already extended their leases under the 1967 Act.
What is the basis of the enfranchisement price for flats?
Under Schedule 6 of the 1993 Leasehold Reform Act:
- Value of freeholder and intermediate leaseholders’ interests
- 50% of the marriage value
- Compensation for other losses
What rights does the 1993 Act grant tenants in respect of a new lease?
- New lease at a peppercorn ground rent
- For a term expiring 90 years after the existing term date
How are lease extension premiums calculated for flats?
In accordance with Schedule 13 of the 1993 Act:
- Diminution in value of landlord and intermediate leaseholders’ interests
- 50% of marriage value
- Compensation for landlord’s other losses
Who determines the basis for valuation under the 1967 Act in the case of houses ?
This is a legal issue
