How to reach market value

ADJUSTMENTS
In The Earl Cadogan v Farrokh Faizapour & John Stephenson [2010] UKUT 3 (LC), a collective enfranchisement in PCL, the UT categorise adjustments as follows:
Non-physical factors; and
Physical factors.

Non-physical factors:
Time, that is for market movement from the sale date of the comparable to the valuation date, by applying an appropriate index; and
Lease length/relativity.

Physical factors, which include:
Condition – improvements and disrepair;
Location, position;
Floor, GIA; and
Outside space, ie terrace, garden etc…

The UT say they prefer the adjustments for non-physical factors (time and lease length/relativity) to be made first, followed by those for physical factors (condition, location etc).
The final ‘end adjustment’, if applicable, is that to be made for the benefit of the Act.

ADJUSTMENTS - WEIGHTING
Having made all of the adjustments the valuer then attributes weight to each, what is also referred to as a hierarchy of evidence. That is to say an opinion is expressed as to whether the comparable sales analysed are to be attributed equal weight, or are to be weighted in favour of one or more. In any event the weighting will add up to 100%.

In Earl Cadogan v Betul Erkman, the UT having made the adjustments to the three comparable sales analysed, go on to attribute weight to each: 70%, 20% and 10% - total 100%.

Following on from the above, the UT adopted the same approach in The Earl Cadogan (and others) v Cadogan Square Limited, where they set out their decision in tabular form. The adjusted weighted value of £884 psf is applied to the GIA of the subject property.

James Wilson is Head of Valuation at W.A.Ellis and co-author of ‘Leasehold enfranchisement explained’. He recently presented at the Leasehold Forum.