Topic 13 - Assessing the Property

Question 1

The value of freehold property could be negatively impacted by what?

Answer 1

The existence of easements and covenants.

Flying freehold

Disputes

Question 2

Freehold flats are seen as problematic to lenders because?

Answer 2

There is no clear responsibility for certain areas in the building.

Question 3

Issues that could affect the value of a leasehold property:

Answer 3

• The lease may contain restrictions that a buyer might find unreasonable.
• The length of the remaining lease term is crucial.
• If it used to be a council flat.

Question 4

Lenders generally insist that leasehold properties have a specified unexpired period of at least…

Answer 4

…30 to 40 years beyond the end of the mortgage term. Some require as much as 60 to 80 or more.

Question 5

Marriage Value -

Answer 5

If a lease has less than 80 years to run, the leaseholder will have to pay a premium and an additional ‘marriage value’ to extend the lease. The freeholder is entitled to 50% of the marriage value.

Question 6

A new owner must have owned the lease for how long before they have the statutory right to extend it?

Answer 6

Two years.

Question 7

What information does a lender require

Answer 7

plot number and location
Purchase price Type of property
Tenure of property
Number and type of rooms and accommodation
Whether vacant possession is available
Alterations proposed
Proposed use of the property 
Name of the builder and whether the builder is a member of the National House Building Council (NHBC) or a similar protection scheme
Inspection arrangements for self‐builds

Question 8

What is AST?

Answer 8

Assured shorthold Tenancy - tenancy agreement that sets out a fixed period for tenancy usually 1 year

Question 9

How might disputes affect the property value?

Answer 9

„ boundaries;
„ trees or hedges; „
access;
„ noise.

Question 10

What problems might there be with leasehold property?

Answer 10

Restrictions and obligations
The length
Old local authority flats

Question 11

To extend a lease the leaseholder has to pay

Answer 11

A premium and a marriage value

Question 12

How is the cost of extending a lease calculated?

Answer 12

It costs the Simon unit ion value and 50% of the marriage value.

The calculation considers the diminution (loss) in the landlord’s interest in the property and the marriage value.

The landlord will not get ground rent in the extended term (so gets an amount to compensate)

The lease would have reverted to the land lord so they need to be compensated.

Question 13

What is Flood Re

Answer 13

A not for profit company who helps properties at the highest risk of flooding to get insurance

Question 14

How does flood re work

Answer 14

Every insurer that offers home insurance in the UK must pay into the Flood Re Scheme. This Levy raises £180m every year that we use to cover the flood risks in home insurance policies.

Flood Re works with insurers behind the scenes. When you buy home insurance cover, your insurer can choose to pass the flood risk element of your policy to us for a fixed price.

If you make a valid claim for flooding, your insurer will pay the claim. Later on, we’ll reimburse that insurer from the Flood Re fund.

In short, you buy home insurance in the usual way. We cover the flood risk and that helps to keep your premiums down.

Once a claim has been settled by the insurer in a normal way Trey will claim a settlement from flood re

Question 15

How can a property be eligible for flood re

Answer 15

Have been built before 1 Jan 2009 be insured by the home owner and have a council tax band.

Question 16

How do flood re calculate premium and excess

Answer 16

• The insurer pays a capped insurance premium to Flood Re for each property insured under the scheme, based on the property’s council tax band, and pays an excess for every claim.
• The premium is not affected by the property’s level of flood risk, and is the same for all properties in the same council tax band. The premium will be lower than would normally apply to a high-risk property due to the subsidy.
• I f the insurer can reinsure the flood risk elsewhere for a lower premium it is allowed to do so.