© 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.
[image1]Part of a valuer’s ‘basic training’ is to derive values, wherever possible, from market evidence. However, for Leasehold Reform Act valuation, there are at least two obstacles.
When assessing marriage value the values needed are for the flat or house held on the current lease and the newly extended lease or freehold. Usually all flats in a block were sold on leases expiring on the same date. There may be no longer leases and so no sales to draw conclusions about the extended lease value.
The Act requires the valuation of the existing lease takes place in a mythical world where there are no rights to extend the lease or buy the freehold. This is known as the ‘no Act world’.
In the real world those rights are available to all leaseholders who can extend the lease or buy the freehold at a time of their choosing. Because only 50% of the marriage value arising is paid, a real, if small, profit is inherent. By common consensus, the rights added value to leaseholds, as purchasers became aware of them. So all prices achieved for short and medium term leases reflect ‘the benefit of the Act’ which would not be present in the ‘no Act world’.
Valuers agreed there should be a relationship between the values of a property held on varying lease lengths. This has become known as ‘relativity’. Theoretically, if you have a value at one lease length, you should be able to calculate the value on another lease length by adopting the appropriate relativity.
But as short lease values have to relate to the no Act world, real world evidence is not much help. So it is not surprising that valuers did not agree on the appropriate relativities and disputes went to the LVT and Lands Tribunal.
In December 2006, in the case of Arrowdell, the Lands Tribunal grappled with the relativity issue: “... we have been acutely aware of the difficulty of reaching a satisfactory conclusion on relativity ... and it is clear that this is a problem that is liable to confront LVTs... The likelihood is that decisions will be varied and inconsistent...we consider that graphs of relativity are capable of providing the most useful guidance. While it may be that relativities will vary between one type of property and another and from area to area, we think that there is little doubt that the predominant factor is the length of the term. It ought, we believe, to be possible to produce standard graphs ... on the basis of a survey of assessments made by experience valuers. “We ... hope that the RICS may find itself able to ... produce guidance in the form of standard graphs that can readily be applied by valuers .... Such graphs can be used as evidence by LVTs, with the relativities shown being applied by them in the absence of evidence compelling the adoption of other figures.”
The RICS soon concluded it would not be possible to agree on definitive graphs. Instead it has produced an authoritative guide to practitioners’ graphs. No judgement is made on the suitability of any particular graph.