Leasehold
May 1, 2024

How accurate and useful is the lease extension calculator?

The purpose of a calculator is to give an indication or estimate of the premium payable for a lease extension.

The purpose of a calculator is to give an indication or estimate of the premium payable for a lease extension. The accuracy of it depends on the user entering the correct data, such as market value, remaining lease years and ground rent.

If you enter a long lease value within £20,000 of its true value, then it estimates that in comparison with reported figures it is accurate to 90% in giving a range.

It uses the same methodology used by a Registered Valuer but is not as exacting.

Key inputs and changes

The calculator takes into account various factors such as market value, remaining lease years and ground rent. A key input is also relativity percentage which has been changed by case law.

In recent years changing case law has benefited freeholders through relativity percentages.

Limitations and considerations

Ground rent reviews are not considered by the calculator along with impact of short lease sales evidence and intermediate leases. Ground rent input does not include rising rents or rents linked to RPI or flat value to current date either.

Rates Used in Technical Inputs

Relativity: Savills “Unenfranchiseable” (Upper Tribunal) Zuconni case 

Deferment: 5%

Capitalisation: 7%

Importance of a Valuer's Report

An estimate is a rough guide whereas a Registered Valuers report gives an accurate assessment.

A registered valuers report provides evidence, justifications and recommendations when negotiating with the freeholder. Leaseholders often receive an initial offer far higher than reasonable from freeholders hence why they need one.

The report will contain sale evidence, support from case law for key inputs and recommendations for negotiations/serving formal notices.

Poor Ground Rent

The calculator doesn't take rising rents into consideration. It only calculates one figure, and can’t measure those that are connected to RPI or flat value.

Valuation reports always come in handy when people have to deal with aggressive ground rents. They help leaseholders make informed decisions.

In Conclusion

At the end of the day, an estimate calculator is helpful in giving us a rough idea of what we’re dealing with. But it's nothing compared to a Valuer’s report. They're crucial for accurate assessments, negotiations, and decision-making — especially in situations where there's aggressive ground rent involved.