Ground Rents With Short Leases

ground-rents-with-short-leases

Ground Rents Short Leases

Ground rents with leases of 99 years are generally quite easy to place a value on. It is simply a multiplication of the ground rent income. Depending on the ground rent increases the amount an investor will want to pay will be between fifteen and twenty times annual income. However a different formula is used when the unexpired term of a lease dips below 80 years. This is because the freeholder is able to charge the lessee a premium to extend their lease.

Therefore a simple multiplication of the annual ground rent is no longer used to work out the value of the freehold. There are quite a few leasehold extension calculators on the internet that one can use to at least give you an idea what you can expect to receive as a premium if your lease has dipped below the 80 year threshold.

Short Leases Valuations - Short Lease Valuation

If you want to find out precisely what your ground rent reversions are worth it will be necessary to have a valuation carried out by a professional valuer. Unfortunately these valuations do not come cheap and you can expect to pay up to £1,000 for a valuation. The valuation will require a visit to the property and access will need to be arranged with your lessees.

Not many landlords are prepared to go down this route unless they have many flats in the same block with similar leases whereby they can use the same valuation for all of the flats. Our company will be able to give you a desktop valuation that you can consider. We will not charge you a fee for a desktop valuation.

Leases Under 80 Years

If you can’t agree a price for the lease extension then you will probably have to apply to the Leasehold Valuation Tribunal (LVT) who will determine how much a lease extension will cost. Unfortunately the leaseholder will be responsible for all of the costs which can be quite costly.

Applying to the LVT is not expensive in itself but you will have to provide evidence to back up your valuation which can be costly. This will involve surveyors costs and legal fees. You can represent yourself but many leaseholders employ a professional who is used to dealing with the LVT.