© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Development value is often raised in a collective freehold purchase, causing confusion, muddled thinking and unnecessary references to Tribunal.
As with all valuations the amount depends on how a potential purchaser looks at the opportunity; what is it and is it physically possible? How long will it take and how much will it cost? Is there planning permission or is it likely? What are the risks? How much do I need to set aside for this?
Schedule 6 of the 1993 Act tells us how to deal with this. Paragraph 3 concerns development taking place at the end of the lease or during the lease without trespassing on the lessee’s land or where there are reserved rights in favour of the landlord. Examples include an additional floor on a flat roof or within a roof space.
Paragraph 3 takes into account the hope of non- participating tenants seeking new leases of their respective flats and can deal with the hope that development will take place during the lease by negotiation. Much of the wording in the House of Lords decision Cadogan v Sportelli (from Para 96) applying to hope value of non-participating tenants can apply to the hope of development value. It would be calculated in a similar way to Marriage Value but with a further discount reflecting the need for agreement.
Whilst assessed similarly to marriage value it is not marriage value. Therefore, the hope of development can be included whether or not the leases are below 80 years unexpired and whether Marriage Value under Paragraph 4 is payable.
Paragraph 4 applies where development can only take place where the developer (freeholder or leaseholder), can acquire land or can obtain a release of a covenant from the other party to the lease. Development value here is part of “marriage value” and applies where the leases are 80 years or less.
The financial incentive for the leaseholders is that once the freehold is under their control through the nominee purchasing company they can grant themselves long leases on different terms. This can include the grant of a new long lease which allows development previously impossible. Such development may include the roof space, or a basement excavation.
Paragraph 5 compensates for a loss of other adjoining property following the acquisition of the freehold. This specifically mentions “loss of development value” (eg: the inability to redevelop a block, part of which owned by the lessees). Do not confuse compensation for loss of adjoining property here with development value arising within the garden and grounds which is “Appurtenant Property” (defined in section 1 (7) of the Act). The latter is considered under paragraphs 10-13 where similar considerations as in paragraphs 3, 4 and 5 apply.
Roger Nelson FRICS, IRRV (Hons) is a Director at Each Side Leasehold. Member of Association of Leasehold Enfranchisement Practitioners