Categories:Real Estate,UK

Valuation of intermediate leases on a collective enfranchisement

The Court of Appeal has clarified whether potential development value should be taken into account where there are intermediate leases between the freeholder and the nominated purchaser for participating tenants seeking to exercise their right to collective enfranchisement.

Proprietors of leasehold residential property will be well aware that in some areas, London in particular, it can be very difficult to sell a residential property, be it a house or a flat, with a medium or short lease. In such circumstances, consideration may be given to leasehold enfranchisement. The Leasehold Reform Housing and Urban Development Act 1993 allows leaseholders of flats to collectively purchase the freehold of their building (i.e. a collective enfranchisement) or to extend the terms of their individual leases by 90 years.

Property investors and landlords faced with a collective enfranchisement will wish to extract the maximum value from the leaseholders who exercise the right. Valuation of the interest being acquired was the issue in the recent Court of Appeal decision in Cravecrest Ltd v Trustees of the Will of the Second Duke of Westminster and another

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