Leasehold
May 1, 2024

Inspection v Desktop for Lease Extensions & Enfranchisement

Desktop studies for lease extensions and freehold enfranchisements are now growing in popularity. Here is a guide on how...

Desktop studies for lease extensions and freehold enfranchisements are now growing in popularity. Here is a guide on how desktop studies work and when inspections may still be necessary:

Desktop Studies for Lease Extensions

  • Feasibility: desktop studies are always possible if the property being valued is in a lease-maintained condition as required by the Leasehold Reform Act.
  • Hypothetical State: rather than being based on its real-world condition, the valuation will consider the value of the property as if it were in a hypothetical lease-maintained condition.
  • Requirements: it’s crucial to have accurate floorplans for desktop studies. They are often obtained from sales particulars or the lease, however, not all leases include suitable floorplans.
  • Time and Cost Savings: desktop studies save time and cost significantly, making them inexpensive.

Inspection Considerations

  • Lease Duration: because there isn’t much room for error with longer leases above 80 years where marriage value isn't a significant factor, this is where desktop studies shine best. However, shorter leases require an inspection due to their length and higher premiums require an inspection due to their price too.
  • Location Factors: properties valued in £/sq ft especially benefit from inspections in Prime Central London (PCL) to ensure accuracy. Outside PCL is where the market works differently and gives some margin of error.

Freehold Enfranchisements

  • Desktop Study Advocacy: given that all flats within the building have leases greater than 80 years and there is no significant Development Value (DV), then it’s safe to use desktop studies for freehold enfranchisements most of the time.
  • Development Value Consideration: with potential development comes new dwellings or extensions which can involve significant DV. In these cases an inspection is usually necessary.
  • Impact on Premium: the Development Value can greatly impact the total premium, so an on-site inspection is often used to assess feasibility and intent.

Summary

So desktop studies do offer efficiency especially for properties with longer leases and where Development Value is not a critical factor. However, inspections are preferred, especially for Prime Central London, so it shouldn’t be forgotten to consider these factors before deciding whether or not to inspect.